The ECB injects 3,400 million in its first TLTRO-III auction

European banks have generally reduced their participation in this type of operations. In the first auction of the TLTRO-II program, almost 400,000 million euros were awarded and more than 500 entities attended. Although the interest rate applied is 0%, for those banks whose eligible loans exceed a reference value set by the ECB, the interest in this auction will be the average rate of the deposit facility rate, currently set at -0 ,5%.

If the 28 entities meet the necessary conditions to qualify for this negative interest rate, the ECB will end up receiving them with 16.98 million euros, which is the equivalent of 0.5% of the 3,396 million euros that have made up this first auction of liquidity.

The entities will receive the funds on September 25, 2019 with a maturity of three years, which will end on September 28, 2022. The bulky decline compared to auctions conducted during the TLTRO-II program, when the lower the amount was 45.3 billion euros, has happened despite the fact that the BCE decided to improve its conditions last week.

As part of the stimulus package announced by the monetary authority, the expiration term of each auction of the TLTRO-III program was increased from two to three years and its cost was modified. Now the average interest rate for each auction will be equal to the average rate applied in the main refinancing operations of the Eurosystem, which was currently set at 0%. Previously, the cost was to be 10 basis points above the reference interest rate.

The remuneration was also modified for those banks that meet the loan conditions, so that they will now be remunerated with the average type of deposit facility (-0.5%), while it was estimated on 10 points above that rate.

Source: dpa