TLTRO III could offer 0% or negative interest to banks which transform liquidity into loans

Members of the ECB´s Council are inclining in favor of compensating banks for loans to individuals and companies, although they are skeptical about offering lenders relief for the charge they receive for their idle balances, analysts at Link Securities point out.

The legislators are open offering zero or even negative interest rates to those banks which contribute to the real economy with liquidity they borrow through the BCE´s unlimited liquidity auctions, the so-called TLTROs, which begin in September. However, they commented that a scaled system (where some excess of reserves is considered exempt of negative rates) has been received with considerable skepticism by some members of the ECB Council. The agency indicated that various regulators said that the relief for banks would be modest and exceded by the risks.