The TLTRO clashes with the old LTRO

The latest measures announced by the ECB will lead to new liquidity conditions for the Eurozone, experts at Afi point. The potential liquidity injection of the TLTRO’s first phase is close to €400 billion, whereas the second phase could be near €300 billion.

The incentives for institutions to return liquidity to the Eurosystem are really similar to the ones that existed before the ECB’s meeting. The replacement of the 3-year LTRO by the TLTRO will have a substantial impact, especially on the peripheral entities (which are the ones that gather the bulk of maturities ending in December and February).

Specifically, the outstanding amounts go up to €120 billion for the Spanish bank and €110 billion for the Italian bank. Such quantity exceeds the maximum established for the first TLTRO phase in SEP/ DEC (around €75 and €54 billion), so the net effect of an increase will be limited in the peripheral countries.

“The result for the Eurosystem as a whole will be probably positive,” analysts at Afi claim.

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