ECB says banks soak up of 74 bn euros in cheap loans

18th June 2015, Comments 0 comments

The European Central Bank said Thursday it lent nearly 74 billion euros ($84 billion) to 128 banks in the fourth round of special liquidity measures aimed at reflating the eurozone economy.

The ECB unveiled its so-called Targeted Longer Term Refinancing Operations or TLTROs last year, under which it makes cheap cash available to banks for a period of three years on condition they lend it on to the real economy.

And it has so far conducted four such operations.

The take-up of the funds in the first three TLTROs was watched closely for signs that lending the single currency area might finally be picking up.

But the TLTROs have now taken more of a back seat following the ECB's much grander scheme of bond purchases to pump more than 1.1 trillion euros ($1.3 trillion) into the economy and push up the rate of inflation in the euro area.

The ECB said that 128 banks had bid for 73.789 billion euros in funds in the latest TLTRO, compared with 97.8 billion euros in the previous one in March.

Analyst projections for the new round had ranged widely from as little as 20 billion euros to as much as 160 billion euros.

The combined volume of all four TLTROs so far -- effectively the amount of cash the ECB has pumped into the economy -- now stands at 384 billion euros.

Analysts described the latest take-up of funds as "healthy."

The data "add to positive signs for the banking sector, but we doubt it will presage a sharp rise in lending," said Capital Economics economist Jennifer McKeown.

"Amid bond market volatility and fears about Greece, banks might see these funds as an attractive form of financing for non-lending purposes. So today's news is certainly no guarantee of a lending revival to come. Indeed, if recent signs of a softening economic recovery are anything to go by, weak loan demand is likely to mean that lending remains restrained," she said.

© 2015 AFP

0 Comments To This Article