Wealth Manager - the site for professional investment managers

Register to get unlimited access to all of Citywire’s Fund Manager database. Registration is free and only takes a minute.

Banks gorge on cheap loans in second LTRO

Banks gorge on cheap loans in second LTRO

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.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Citywire TV
Play WMR: Why Russia will lose this war

WMR: Why Russia will lose this war

Author and journalist Adam Lebor believes a perfect storm is brewing when it comes to the Russian economy. .

Play WMR: Gerard Lyons warns Asia is the real risk, not Russia & Ukraine

WMR: Gerard Lyons warns Asia is the real risk, not Russia & Ukraine

Chief economic adviser to London mayor Boris Johnson outlines the geo-political risks in Asia and explains why the risk of another eurozone crisis must not be underestimated.

Play Japan's slump, the umbrella revolution and the battle for Brazil

Japan's slump, the umbrella revolution and the battle for Brazil

With the arrows of Abenomics appearing to be missing their targets and political uncertainty rife in Hong Kong and Brazil we take a look at investor sentiment in this week's Investment Pulse

Your Business: Cover Star Club

Profile: The adviser that tempted Robin Minter-Kemp on board

Profile: The adviser that tempted Robin Minter-Kemp on board

It is rare to meet an impassioned individual who is willing to bang the drum for investment advisory right now

Wealth Manager on Twitter