Wealth Manager - the site for professional investment managers

Register for full access to Citywire’s Fund Manager database, news and analysis. 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 Inside ETFs: Why the US bull-run still has legs

Inside ETFs: Why the US bull-run still has legs

Global equities suffered a sharp sell-off in the third quarter but exchange traded fund investors are continuing to back the US to outperform in 2015

Play Paul Niven: I won't rip up the Foreign & Colonial Trust history book

Paul Niven: I won't rip up the Foreign & Colonial Trust history book

The newly appointed manager of the Foreign & Colonial trust talks about his plans for UK's oldest investment company.

Play Dangerous daisy chains, Black Friday blues and Uber valuations

Dangerous daisy chains, Black Friday blues and Uber valuations

This week’s Investment Pulse looks at the domino effect in European banks, America’s disappointing Black Friday and how much Uber is really worth.

Your Business: Cover Star Club

Manchester wealth firm hires Coutts director for London launch

Manchester wealth firm hires Coutts director for London launch

Former Coutts director Tony Robinson has joined Chartered Wealth Management to head the company’s newly opened London office.

Wealth Manager on Twitter