European Central Bank Modifies Terms of Targeted Lending Operations and Announces New Refinancing Operations

The European Central Bank has announced a series of modifications to its targeted longer-term refinancing operations (referred to as TLTRO III) to facilitate ongoing access of firms and households to bank credit. TLTRO III is the latest in the series of Eurosystem refinancing operations that provide financing to Eurozone credit institutions.
 
The modifications to TLTRO III are: 
 

• From June 24, 2020 to June 23, 2021, the interest rate on all TLTRO III operations will be at least 50 bps below the average rate for the Eurosystem’s main refinancing operations for that period;
• The lending performance threshold required for further reductions to the interest rate on TLTRO III operations has been reduced from 2.5% to 0% over benchmark net lending for the period from March 1, 2020 to March 31, 2021; and
• Banks that do not meet the 0% lending performance threshold remain subject to the original rates evaluated for the period from April 1, 2019 to March 31, 2021, but the lending threshold to obtain more favorable interest rates on the basis of this longer assessment period will be lowered from 2.5% to 1.15%.

The ECB has also announced additional longer-term financing operations to be launched alongside the ECB’s modified TLTRO III. On March 12, 2020, the ECB announced a series of bridge LTROs to be allotted on a weekly basis between March to June 2020, all maturing on June 24, 2020 (tying in with the June 24 settlement date of the next TLTRO III series). The ECB has now announced an additional series of seven pandemic emergency longer-term refinancing operations, designed to provide a backstop for money markets after the expiry of the bridge LTROs. The interest rates on PELTROs will be 25 bps below the average rate for the Eurosystem’s main refinancing operations over the life of the PELTRO.
 
View the ECB's announcement on TLTRO III.

View the ECB's announcement on the new PELTROs.

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