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    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).


    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%. 


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

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