Merler, S. (2014) “T.L.T.R.O. is Too Low to Resuscitate Optimism – the take up of liquidity under the ECB’s new TLTRO programme was well below expectations yesterday“, Bruegel Institute, 19 September.
Yesterday the ECB held the first auction of liquidity under its new TLTRO programme. The take up was well below expectations, raising questions about the actual ability of the ECB to regain control of its balance sheet.
It’s the third week of September and the sky is already getting quite grey, over Frankfurt. The ECB held yesterday the first allotment of liquidity under its new TLTRO programme. It was introduced in June and it foresees two initial auctions (September and December 2014) in which banks will be able to borrow up to an initial allowance of roughly 400bn plus a number of additional leveraging operations.
Expectations on the take up in the first operation were high. A Bloomberg poll this week showed that analysts, on average, expected banks to bid for €174bn of loans in September and €167bn in a second auction in December. The actual amount allotted, however, was only 82.6 billion, i.e. less than half the average expectation for this first operation.
Results at the country level are not known in full yet, but sparse news suggest that around 46% of the total went to Spanish and Italian banks (Figure 1) . Reuters reports that ten Italian banks, including Italy’s top three lenders Intesa Sanpaolo, UniCredit and Monte dei Paschi di Siena, took a combined 23 billion euros. This represents 28 percent of the total 82.6 billion allotted, and about 30% of Italian banks’ potential allotment (of 75 billion). El Mundo reports that Banco Santander, BBVA, Caixabank, Banco Popular and Bankia took in total 15 billion, whereas Banco Sabadell and Bankinter did not participate. This represents 18 percent of the total and about 28% of Spanish banks’ initial allowance. Bloomberg reports that Amsterdam-based ING Groep NV and ABN Amro Bank NV said they subscribed for funds (but did not disclose the amount), whereas Austria’s three largest banks, Erste Group Bank AG, UniCredit Bank Austria AG and Raiffeisen Bank International AG, didn’t take part.
Relevant posts:
- Tonveronachi, M. (2014 ) “The ECB and the Single European Financial Market: A Proposal to Repair Half of a Flawed Design“, Levy Economics Institute Publications, The State of the US and World Economies Public Policy Brief No. 137, September.
- Kirkegaard, F. J. (2014) “The ECB Throws down the Gauntlet“, The Peterson Institute for International Economics, 05 September.
- European Central Bank (2014) “Monthly Bulletin“, ECB Eurosystem, August.