Featured Product

    ECB Decisions on Longer-Term Refinancing Operations Amid COVID Crisis

    April 30, 2020

    The Governing Council of ECB decided to conduct a new series of seven additional refinancing operations, called the pandemic emergency longer-term refinancing operations (PELTROs). These operations will provide liquidity support to the euro area financial system and contribute to preserving the smooth functioning of money markets by providing an effective backstop after the expiry of the bridge longer-term refinancing operations that have been conducted since March 2020. Additionally, The Governing Council decided on a number of modifications to the terms and conditions of its targeted longer-term refinancing operations (TLTRO III) to support further the provision of credit to households and firms. The changes to TLTRO III will be implemented via amendments to the EU Decision 2019/1311 on TLTRO III (ECB/2019/21).

    PELTROs

    The first operation will be announced on May 19, allotted on May 20, and settled on May 21, 2020. The operations provide longer-term funding to counterparties with decreasing tenors, starting with a tenor of 16 months in the first operation and ending with a tenor of 8 months in the last operation. Counterparties participating in PELTROs will be able to benefit from the collateral easing measures in place until the end of September 2021 that were announced by the Governing Council on April 07 and 23, 2020. The PELTROs will be conducted as fixed rate tender procedures with full allotment. The interest rate will be 25 basis points below the average rate applied in the main refinancing operations (currently 0%) of the Eurosystem over the life of the respective PELTRO.

    Modifications to TLTRO III 

    For the period from June 24, 2020 to June 23, 2021, the interest rate on all TLTRO III operations will now be 50 basis points below the average rate applied in the Eurosystem’s main refinancing operations over the same period. The interest rate on the main refinancing operations is currently 0%. For counterparties whose eligible net lending reaches the lending performance threshold, the interest rate applied from June 24, 2020 to June 23, 2021 on all TLTRO III operations will be 50 basis points below the average interest rate on the deposit facility prevailing over the same period, and in any case not higher than -1%. The deposit facility rate is currently -0.5%. The start of the period over which banks’ lending performance will be assessed to ascertain whether they qualify for this lower rate will be brought forward to March 01, 2020, from April 01, 2020, while the end of the assessment period will remain unchanged at March 31, 2021. 

    For banks that reach the lending threshold of 0% between March 01, 2020 and March 31, 2021, the most favorable conditions will be applied throughout the entire life of the operations. The interest rate applied before June 24, 2020 and after June 23, 2021 for these counterparties will be the average interest rate on the deposit facility over the life of the respective operation. For banks that do not reach the lending threshold of 0% between March 01, 2020 and March 31, 2021, the original TLTRO III interest rates and lending threshold, evaluated over the longer period of between April 01, 2019 and March 31, 2021, will apply. For these counterparties, in recognition of the challenging credit environment during the pandemic period, the lending threshold that they need to meet over this longer assessment period will be lowered to 1.15%, from 2.5%. 

     

    Related Links

    Keywords: Europe, EU, Banking, TLTRO III, Interest Rate, COVID-19, PELTROs, ECB/2020/25, ECB/2019/19, ECB

    Featured Experts
    Related Articles
    News

    EBA Clarifies Use of COVID-19-Impacted Data for IRB Credit Risk Models

    The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.

    June 21, 2022 WebPage Regulatory News
    News

    EP Reaches Agreement on Corporate Sustainability Reporting Directive

    The European Council and the European Parliament (EP) reached a provisional political agreement on the Corporate Sustainability Reporting Directive (CSRD).

    June 21, 2022 WebPage Regulatory News
    News

    PRA Consults on Model Risk Management Principles for Banks

    The Prudential Regulation Authority (PRA) launched a consultation (CP6/22) that sets out proposal for a new Supervisory Statement on expectations for management of model risk by banks.

    June 21, 2022 WebPage Regulatory News
    News

    EC Regulation Amends Standards for Calculating Credit Risk Adjustments

    The European Commission (EC) published the Delegated Regulation 2022/954, which amends regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.

    June 21, 2022 WebPage Regulatory News
    News

    BIS Hub Updates Work Program for 2022, Announces New Projects

    The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.

    June 17, 2022 WebPage Regulatory News
    News

    EIOPA Issues Cyber Underwriting Proposal, Statement on Open Insurance

    The European Insurance and Occupational Pensions Authority (EIOPA) published two consultation papers—one on the supervisory statement on exclusions related to systemic events and the other on the supervisory statement on the management of non-affirmative cyber exposures.

    June 17, 2022 WebPage Regulatory News
    News

    US Senate Members Seek Details on SEC Proposed Climate Disclosure Rule

    Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)

    June 16, 2022 WebPage Regulatory News
    News

    EIOPA Consults on Review of Securitization Framework in Solvency II

    The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.

    June 16, 2022 WebPage Regulatory News
    News

    UK Authorities Issue Regulatory and Reporting Updates for Banks

    The Prudential Regulation Authority (PRA) issued a statement on PRA buffer adjustment while the Bank of England (BoE) published a notice on the statistical reporting requirements for banks.

    June 15, 2022 WebPage Regulatory News
    News

    BCBS Issues Climate Risk Principles while HKMA Expresses Its Support

    The Basel Committee on Banking Supervision (BCBS) issued principles for the effective management and supervision of climate-related financial risks.

    June 15, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8286