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European Central Bank (ECB)
Press Release, Mar 10, 2016
Key ECB-Rate: 0.00 -0.05
At today’s meeting the Governing Council of the ECB took the following monetary policy decisions:
(1) The interest rate on the main refinancing operations of the Eurosystem will be decreased by 5 basis points to 0.00%, starting from the operation to be settled on 16 March 2016.
(2) The interest rate on the marginal lending facility will be decreased by 5 basis points to 0.25%, with effect from 16 March 2016.
(3) The interest rate on the deposit facility will be decreased by 10 basis points to -0.40%, with effect from 16 March 2016.
(4) The monthly purchases under the asset purchase programme will be expanded to €80 billion starting in April.
(5) Investment grade euro-denominated bonds issued by non-bank corporations established in the euro area will be included in the list of assets that are eligible for regular purchases.
(6) A new series of four targeted longer-term refinancing operations (TLTRO II), each with a maturity of four years, will be launched, starting in June 2016. Borrowing conditions in these operations can be as low as the interest rate on the deposit facility.
The Governing Council of the European Central Bank (ECB) decided today to launch a new series of four targeted longer-term refinancing operations (TLTRO II). The new operations will offer attractive long-term funding conditions to banks to further ease private sector credit conditions and to stimulate credit creation. TLTRO II is intended to reinforce the ECB’s accommodative monetary policy stance and to strengthen the transmission of monetary policy by further incentivising bank lending to the real economy. In conjunction with the other non-standard measures in place, TLTRO II will contribute to a return of inflation rates to levels below, but close to, 2% over the medium term.
Counterparties will be able to borrow in the operations a total amount of up to 30% of a specific eligible part of their loans as at 31 January 2016, less any amount which was previously borrowed and is still outstanding under the first two TLTRO operations conducted in 2014.
The four TLTRO II operations will be conducted in June, September and December 2016 and in March 2017.
All TLTRO II operations will have a maturity of four years from their settlement date. Counterparties will be able to repay the amounts borrowed under TLTRO II at a quarterly frequency starting two years from the settlement of each operation. Counterparties will not be subject to mandatory early repayments.
The interest rate applied to TLTRO II will be fixed for each operation at the rate applied in the main refinancing operations (MROs) prevailing at the time of allotment. In addition, counterparties whose eligible net lending in the period between 1 February 2016 and 31 January 2018 exceeds their benchmark will be charged a lower rate for the entire term of the operation. This lower rate will be linked to the interest rate on the deposit facility prevailing at the time of the allotment of each operation. Counterparties will receive the maximum rate reduction equal to the difference between the MRO rate and the rate on the deposit facility applicable at the time of take-up if they exceed their benchmark stock of eligible loans by 2.5% in total as at 31 January 2018. Up to this limit, the size of the decrease in the interest rate will be graduated linearly depending on the percentage by which a counterparty exceeds its benchmark stock of eligible loans. For counterparties that exhibited positive eligible net lending in the 12-month period to 31 January 2016, the benchmark net lending is set at zero. For counterparties that exhibited negative eligible net lending in the 12-month period to 31 January 2016, the benchmark net lending is equal to the eligible net lending in that period.
The dedicated reporting scheme of the first series of TLTROs will be retained for TLTRO II, with only two report submissions required, i.e. one to document the borrowing allowance and the benchmark, and one to check the lending performance against the benchmark in two years’ time.
In addition, the Governing Council decided to introduce an additional voluntary repayment possibility for all currently outstanding TLTROs in June 2016, coinciding with the settlement of the first TLTRO II operation. This will allow counterparties to roll over amounts borrowed under the current TLTROs into TLTRO II. The remaining two operations of the current TLTRO programme will be implemented in March 2016 and June 2016, as originally scheduled.
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