Eurozone banks only repay 15% of TLTRO loans

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TLTRO loans are "Targeted longer-term refinancing operations" - loans made by the European Central bank to the banking system. They started in the 2014 eurozone crisis, but really ramped up in the pandemic. Here's the chart:


source

So far they've only repaid €296.3bn (15%) - the ECB was expecting to receive €600bn.

It's unsurprising that early repayment has been so low because of how attractive interest rates on these loans are - you'd repay everything else first. Here's the ECB explainer on how they work:

https://www.ecb.europa.eu/mopo/implement/omo/tltro/html/index.en.html

In TLTRO III, similarly to TLTRO II, the interest rate to be applied is linked to the participating banks’ lending patterns. The more loans participating banks issue to non-financial corporations and households (except loans to households for house purchases), the more attractive the interest rate on their TLTRO III borrowings becomes.

Borrowing rates in these operations can be as low as 50 basis points below the average interest rate on the deposit facility over the period from 24 June 2020 to 23 June 2022, and, if applicable, as low as the average interest rate on the deposit facility during the rest of the life of the same operation

It explains why the eurozone is struggling to bring down inflation. They shoved a shedload of cheap money into the economy, and are struggling to get it out again.



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