Wealth Manager - the site for professional investment managers

Register to get unlimited access to 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 Biotech Growth: we will ride out this storm

Biotech Growth: we will ride out this storm

Geoffrey Hsu of Biotech Growth Trust says the sell-off in biotechnology stocks represents a buying opportunity for long-term investors.

Play Sector Spotlight: Kleinwort Benson's Choukeir on UK equities

Sector Spotlight: Kleinwort Benson's Choukeir on UK equities

In our first Sector Spotlight of the year we explore UK equities on the back of the extreme market turbulence in 2016.

Play Picton: the UK property hotspots for rental income

Picton: the UK property hotspots for rental income

Picton Property Income CEO Michael Morris reveals how he is planning to ride the ‘ripple effect’ as UK economic growth spills out from the capital across the country.

Your Business: Cover Star Club

Profile: PortfolioMetrix is on a mission to kill 'Frankenstein' systems

Profile: PortfolioMetrix is on a mission to kill 'Frankenstein' systems

In a buyers’ market for off-the-peg discretionary management, self-funded start-ups begin at an inherent disadvantage

Wealth Manager on Twitter