ECB updated the frequently asked questions (FAQs) on supervisory measures in reaction to the COVID-19 crisis. ECB also published Decision 2021/124, which amends the earlier Decision 2019/1311, on a third series of targeted longer-term refinancing operations (TLTRO-III). The Decision 2021/124 shall enter into force on the day following that of its publication in the Official Journal of the European Union—that is, February 04, 2021.
To enable shifts from the already outstanding TLTRO-III to the newly announced additional operations, early repayment notification deadlines have been brought forward by one week; this will help to take into account, for the calculation of bid limits, the amounts to be repaid under the voluntary early repayment procedure. Credit institutions leading TLTRO-III groups intending to participate in the seventh TLTRO-III have a very short deadline within which to apply for recognition of the group or changes to an existing group. Thus, changes to the parameters for group participation introduced by the Decision 2021/124 need to be made known to credit institutions as quickly as possible. Additionally, with respect to the changes to Decision 2019/1311, Articles 1, 2, 3, 4, 5a, and 6 of Decision 2019/1311 have been amended, while Articles 5 and 7 of Decision 2019/1311 have been replaced. Also, Annexes I and II have been amended in accordance with the Annex to Decision 2021/124. The revised Decision 2019/1311 states that the Eurosystem shall conduct seven ten TLTROs-III in accordance with the indicative calendar for TLTROs-III published on the ECB website. Each TLTRO-III shall mature three years after the respective settlement date, on a day that coincides with the settlement date of a Eurosystem main refinancing operation, in accordance with the indicative calendar for TLTROs-III.
In July 2019, the Governing Council had adopted the Decision 2019/1311, which provides for TLTRO-III to be conducted over the period September 2019 to March 2021. In March 2020, to support bank lending to those most affected by the spread of COVID-19, the Governing Council had decided to change certain key parameters of TLTRO-III. Then, in April 2020, the Governing Council decided further changes to these parameters. Finally, in December 2020, the Governing Council had decided to adopt additional monetary policy measures aiming to contribute to preserving favorable financing conditions over the pandemic period. As part of these measures, the Governing Council decided to further recalibrate the conditions of TLTROs-III. It decided to extend the period over which considerably more favorable terms will apply to June 2022, that three additional operations will be conducted between June and December 2021, and to raise the total amount that Eurosystem counterparties will be entitled to borrow in TLTROs-III from 50% to 55% of their stock of eligible loans. To provide an incentive for banks to sustain the current level of bank lending, the Governing Council also decided that the extension of the more favorable terms on TLTROs-III to June 2022 will be made available only to banks that achieve a new lending performance target.
The Governing Council considers the full range of measures adopted on December 10, 2020 to be necessary and that the recalibration of certain parameters of TLTRO-III reflected in this Decision 2021/124 to be an incentive for credit institutions to sustain the current level of lending and would help preserve the very attractive funding conditions, which in the past months had supported the flow of credit to the real economy, even at a time of high stress. The Governing Council also considers that the recalibration of the TLTRO-III parameters is the most suitable and appropriate tool to help credit institutions secure the liquidity required to extend loans to households and firms on very favorable terms over the pandemic period, for achieving the price stability mandate of ECB.
Keywords: Europe, EU, Banking, TLTRO III, ECB 2019/21, COVID-19, Decision 2021/124, Liquidity Risk, FAQ, ECB
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