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    ECB Modifies New Targeted Longer-Term Refinancing Operations

    September 12, 2019

    The Governing Council of ECB decided to modify some of the key parameters of the third series of targeted longer-term refinancing operations (TLTRO III) to preserve favorable bank lending conditions (Decision (EU) 2019/1558). The changes will apply as of the first TLTRO III operation to be allotted on September 19, 2019 and will be implemented in an amendment to the Decision of ECB on a third series of targeted longer-term refinancing operations (ECB/2019/21). In terms of the pricing of TLTRO III, the previously announced 10-basis point spread above the average interest rate of the main refinancing operations of the Eurosystem and, for counterparties exceeding their lending benchmark, above the average interest rate on the deposit facility, will no longer be applied. The Decision shall enter into force on September 16, 2019.

    Therefore, the interest rate for TLTRO III will be equal to the average rate applied to the main refinancing operations of the Eurosystem over the life of the respective TLTRO III operation. For counterparties whose eligible net lending between the end of March 2019 and the end of March 2021 exceeds their benchmark net lending, the rate applied to TLTRO III operations will be lower and can be as low as the average interest rate on the deposit facility prevailing over the life of the respective TLTRO III operation. This adjustment in the pricing of TLTRO III will enhance the effectiveness of the operations by increasing the support they provide to bank funding conditions, so that banks may continue to lend to firms and households on favorable terms. The maturity of TLTRO III operations has been extended to three years as of their settlement date. Following the extension of the maturity of TLTRO III operations, counterparties will be able to repay the amounts borrowed under TLTRO III earlier than their final maturity, at a quarterly frequency starting two years after the settlement of each operation.

     

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    Effective Date: September 16, 2019

    Keywords: Europe, EU, Banking, TLTRO III, Refinancing Operations, ECB 2019/21, Interest Rate, ECB

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