European Banks to Repay Less Than Expected in LTRO Next Week

Banks will return 2.861 billion euros ($3.83 billion) in long-term loans to the European Central Bank next week after the ECB started to charge for holding banks’ excess cash overnight and promised more long-term loans.

The amount that banks will repay on Aug. 20 is less than this week’s crisis-loan repayments of 4.15 billion euros and misses the 4.0 billion forecast in a Reuters poll. [ECB/REFI]

The ECB cut interest rates to record lows in June – the deposit rate to below zero – and took several steps to boost lending to euro zone companies. It also pledged to do more if needed to fight off the risk of Japanese-style deflation.

The measures include a new four-year loan scheme, which the ECB hopes will encourage banks to boost their lending. [ID:nL6N0PE5K0]

Banks continue to repay LTRO funds they took from the ECB in late 2011 and early 2012 as they are going through ECB health checks, which are in their final stages now with a Europe-wide bank stress test.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza