Banks take ₣233.5b free ECB cash
Draghi signals time is running out for the bloc’s lenders to get their house in order
Euro-area lenders took ₣233.5 billion (Dh924.6 billion) in free longterm loans from the European Central Bank as they prepare for the potential end of extraordinary stimulus.
The take-up in the last of the ECB’s Targeted LongerTerm Refinancing Operations — four-year loans at a rate that starts at zero and could go lower — compares with a median estimate of ₣110 billion in a survey, with predictions ranging from ₣30 billion to ₣750 billion. The net amount after repayment of ₣16.7 billion from earlier TLTROs is the largest since the programme started.
The operation gives the ECB an insight into lenders’ expectations about the path toward the end of a stimulus spree that also includes negative rates and ₣2.28 trillion in asset purchases. While current guidance foresees a significant pause between the end of the ECB’s bond-buying programme and the first rate increase, some ECB policymakers have said that gap could be shortened or the sequence reversed.
Yesterday, ECB President Mario Draghi signalled time is running out for banks to get their house in order.
“The banking sector’s capacity to fully support the euro area’s recovery is curtailed by its low profitability,” Draghi said in the annual report for the ECB’s bank-supervision arm. “Overcapacities, inefficiencies and legacy assets contribute to banks’ low profitability. It is up to the banks themselves to find appropriate answers to these challenges.”