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 Navigating geopolitical risk with ETFs

Navigating geopolitical risk with ETFs

ETFGI’s Deborah Fuhr on how investors can use exchange-traded funds to position their portfolio.

Play Sarasin’s Boucher: why I like salmon with chocolate

Sarasin’s Boucher: why I like salmon with chocolate

Henry Boucher, manager of the £129 million Sarasin Food & Agriculture Opportunities fund, explains why he is gobbling up salmon and chocolate stocks.

Play Alibaba hype, the UK slowdown and opportunities in European sovereign bonds

Alibaba hype, the UK slowdown and opportunities in European sovereign bonds

Libby Ashby and leading wealth managers analyse what the Alibaba IPO hype means for Chinese equities, slowing growth of the UK economy and whether there’s anything left to play for in the European sovereign bond market.

Your Business: Cover Star Club

Profile: How David Esfandi is shaping Canaccord Genuity WM

Profile: How David Esfandi is shaping Canaccord Genuity WM

After six months as chief executive of Canaccord Genuity David Esfandi's ambitions are taking shape

Wealth Manager on Twitter