Citywire printed articles sponsored by:
View the article online at http://citywire.co.uk/wealth-manager/article/a570773
Banks gorge on cheap loans in second LTRO
by Sarah Miloudi on Feb 29, 2012 at 11:56
The European Central Bank (ECB) has launched its second Long-Term Refinancing Operation (LTRO), with hundreds of banks scooping up €530 billion via its cheap three-year loans programme.
Appetite for the latest LTRO was slightly above experts' expectations, with many predicting banks would borrow €500 billion via the scheme.
The ECB's LTRO works by injecting a bulk sum into the eurozone's financial system, helping to shore up the region's lenders that are struggling to raise money on capital markets. At the same time, Europe's teetering financial institutions have had to contend with increased capital requirements, putting further pressure on banks' balance sheets.
The banks that took part in today's LTRO will access short-term loans at an interest rate of 1%.
The first programme, launched in December last year, attracted a total of 523 banks which borrowed a total of €489 billion. The lenders that took part were thought to include part-nationalised institutions Lloyds Banking Group and Royal Bank of Scotland. Others, like Deutsche Bank, said they had chosen not to participate because the scheme carried with it a 'stigma' of being in difficulty.
A total of 800 banks took part in today's LTRO, after which the euro single currency showed signs of weakness and fell.
Economists reacted positively to the new operation though, with Capital Economics' claiming it reduced the chances of the UK suffering another crunch.
'The ECB’s second long-term refinancing operation conducted this morning should alleviate the risk of a renewed credit crunch, not just in the euro-zone, but in the UK too,' the consultancy said,
However, Capital fears UK bank funding markets will still look strained despite the operation. 'We continue to anticipate some tightening of credit conditions for firms and households over the next few months,' Capital said.
News sponsored by:
Subscribe to Wealth Manager magazine and rack up CPD points
Citywire Wealth Manager has partnered with CISI to enrich the experience of subscribers to our magazine.
Today's top headlines
More about this:
Look up the shares
Aberdeen Live supplement: Fundamentals point to ongoing flows and solid returns from EMD
After a record year for inflows and market-leading performance in 2012, emerging market debt has taken a large step towards the mainstream. Our recent debate covers the outlook for the asset class this year and where opportunities can be found.
On the road
by Dylan Lobo on May 16, 2013 at 16:17