Spanish and Italian banks will have access to fewer ECB funds with new TLTROs

Market discounts ECB cut in deposit rateMarket discounts ECB cut in deposit rate

BancaMarch | One of the major debates of the ECB meeting focused on the access conditions to liquidity for banks: TLTRO III.

In this new round of financing, banks will be able to apply for loans to the ECB at a rate that could reach -0.3% (which would mean that the monetary authority would pay the banks for lending them) when the volume of their loans granted to the real economy surpassed by 2.5% granted in the past February. The final revision will be made with the loan data of March 31, 2021. Entities that fail to increase their loan amounts to the economy will receive a lower bonus and may even have to pay an interest rate of 0.1%.

The ECB also announced other limitations on liquidity requests that will make it difficult for peripheral banks to access the new TLTROs: in particular, banks will only be able to request 30% of the volume of eligible credit, including in this calculation the funds that the banks stop the previous injections (TLTRO II). 

This decision penalizes mainly Spanish and Italian banks, which may have access to fewer funds. For this reason, the European financial sector was punished on the stock market with a -1.4% decline in the sector index of Stoxx600 on Thursday.