Britain's two part-nationalised banks plan to tap the European Central Bank's special three-year funding scheme for a combined amount of about €15 billion, on a par with some of the eurozone's largest banks.
Lloyds Banking Group and Royal Bank of Scotland have both indicated that the scheme – known as the three-year LTRO, or long-term refinancing operation – is attractive because of its low 1 per cent interest rate.
Neither bank would comment on how much they planned to raise through the facility. However, people familiar with their plans said Lloyds, which did not use the LTRO in December, would rubber stamp a plan on Monday to seek about €10 billion of funding. The money would be used to part-fund a portfolio of nearly €30 billion of eurozone lending, focused on Ireland, the Netherlands and Spain, which is set to be wound down over the next three years. About €20 billion of that exposure is already funded through customer deposits.
RBS, which took about €5 billion of LTRO money in December, is set to take a similar amount in Wednesday’s auction, according to senior bankers. The group’s eurozone exposure is focused on Ireland, where it owns Ulster Bank.
UK banks’ appetite for ECB money coincides with the end of the Bank of England’s help providing funding for banks. The Special Liquidity Scheme, through which more than 30 banks and building societies raised a combined £185 billion of funding, has ended and the Credit Guarantee Scheme, which underwrote bank bond issuance, is winding down its operations.
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