You are here

Targeted longer-term refinancing operations (TLTRO)

The Governing Council of the ECB created the targeted longer-term refinancing operations (TLTROs) to stimulate bank lending to the real economy and strengthen the transmission of monetary policy.

 

The first series of TLTROs was announced on 5 June 2014:

  • It covered eight quarterly operations starting in September 2014 and maturing in September 2018; 
  • In the first two operations, banks were entitled to a borrowing allowance of up to 7% of a specific part of their eligible loans. In the subsequent TLTROs, banks were able to borrow additional amounts, depending on developments in banks’ eligible credit activity compared with a specified benchmark for each bank; 

The interest rate on these operations is equal to the rate on the main refinancing operations (MROs) prevailing at the time of the operation (with the exception of the first two operations, where a 10 basis point spread was applied to the MRO rate).

The second series of TLTROs (TLTRO-II) was announced on 10 March 2016, with additional purposes of reinforcing the Eurosystem’s accommodative monetary policy stance and stimulating bank lending to the real economy:

  • It consists of four quarterly operations, each with a maturity of four years, starting in June 2016; 
  • Banks were able to borrow a total amount of up to 30% of a specific set of their eligible loans in the four operations as a whole; 
  • The interest rate on these operations is equal to the rate applied in the MROs prevailing at the time of allotment. In addition, banks whose eligible net lending exceeds their benchmark may be charged a lower rate. This implies a cut in the interest rate on these operations, which may be at least equal to the rate on the deposit facility applicable at the date of allotment of each operation.

The third series of TLTROs (TLTRO-III) was announced on 7 March 2019 and changes to its modalities were published on 12 September 2019, 12 March 2020, 30 April 2020 and 10 December 2020. This series aims to preserve favourable bank lending conditions, ensure the smooth transmission of monetary policy and further support the accommodative stance of monetary policy:

  • It consists of ten quarterly operations with a three-year maturity, starting in September 2019;
  • Banks are able to borrow a total amount of up to 55% of a specific set of their eligible loans in the ten operations as a whole; 
  • The interest rate in each operation will be set at the average interest rate applied in the MROs over the life of the respective TLTRO III operation;
  • In addition, for banks that maintain the level of eligible loans in relation to the benchmark between 1 March 2020 and 31 March 2021, the rate applied in the TLTRO-III between 24 June 2020 and 23 June 2021 will be 50 basis points below the average interest rate on the deposit facility prevailing over the life of the operation, and in any case not higher than -1%;
  • For banks that maintain the level of eligible loans in relation to the benchmark between 1 October 2020 and 31 December 2021, the rate applied to the TLTRO-III operations between 24 June 2021 and 23 June 2022 will be 50 points lower than the average interest rate on the deposit facility prevailing over the life of the operation, and in any case not higher than -1%;
  • In the period before 24 June 2020 and after 23 June 2022, the interest rate applied to banks that reach the lending threshold will be the average interest rate on the deposit facility over the life of the operation;
  • For banks that do not maintain the level of eligible loans in relation to the benchmark between 1 March 2020 and 31 March 2021, but meet the lending threshold for the period from 1 April 2019 to 31 March 2021, the interest rate could be as low as the average interest rate on the deposit facility over the life of the operation;
  • In any case, during the period from 24 June 2020 to 23 June 2022 the interest rate will never be higher than 50 basis points below the average rate applied in the MROs.