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22 June 2016

Reuters: ECB launches new ultra cheap loan tender

The European Central Bank launched a fresh round of super cheap loans, its latest effort to boost lending, lift economic growth and ultimately revive inflation.

Unveiled in March as a potent tool to aid the euro zone's modest credit recovery, the four-year Targeted Long-Term Financing Operation (TLTRO II) could even see the ECB pay banks to take its money, provided that they increase lending to the real economy.

Struggling with ultra low inflation, the ECB has cut its deposit rate deep into negative territory, buys 80 billion euros ($90 billion) worth of assets per month and will offer the new loan scheme every three months, all with the aim of getting consumer price growth back to its target of close to 2 percent.

Under the scheme, banks will initially pay a zero interest rate on the facility but they could be paid up to 0.4 percent of what they borrow if they meet their targets for lending out the cash.

Still, new take-up is expected to be relatively weak as banks already have plenty of access to cheap credit and their main worry is sluggish credit demand from corporate clients.

Bank will be asked to submit bids by Thursday and the ECB announces results at 0930 GMT on Friday.

Full article

© Reuters

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