Targeted Longer-Term Refinancing Operations

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The targeted longer-term refinancing operations (TLTROs) provide financing to Eurosystem credit institutions with maturities longer than one year. They are designed to improve the functioning of the monetary policy transmission mechanism by stimulating bank lending to the real economy.

The TLTROs conducted until March 2017 were launched as part of two distinct programmes: TLTRO I, announced in June 2014 and comprising eight auctions, and TLTRO II, announced in March 2016 and comprising four auctions. In both programmes, the amount that banks could borrow was linked to their loans to non-financial corporations and households (except those for house purchase).

In March 2019, the ECB Governing Council announced a third series of quarterly targeted longer-term refinancing operations (TLTRO III), to be carried out starting in September 2019 and ending in March 2021. Like the previous programmes, the operations feature built-in incentives for credit conditions to remain favourable. Each operation has a duration of three years and the interest rate is indexed to that for the main refinancing operations; counterparties whose lending performance in the specified periods achieves the required targets can benefit from an interest rate reduction.

In September 2019, in light of the less-favourable economic outlook, the Governing Council decided to change some of the parameters of the operations.

In order to address the adverse impact of the COVID-19 pandemic, in March 2020 , the Governing Council introduced more favourable conditions for TLTRO III operations, to be applied in the period from 24 June 2020 to 23 June 2021. On this occasion, the Governing Council raised the borrowing allowance to 50 per cent of the stock of eligible loans as at 28 February 2019, removed the bid limits per operation and introduced an early repayment option after one year from the settlement of each operation, starting in September 2021. Subsequently, in April 2020, an additional decision was taken by the Governing Council to recalibrate TLTRO III conditions through a further reduction in the interest rates and an improvement of the incentive mechanism.

In December 2020, in view of the economic fallout from the resurgence of the pandemic, the Governing Council decided to further recalibrate the conditions of the third series of targeted longer-term refinancing operations (TLTRO III). Specifically, it decided to a) extend by twelve months, to June 2022, the period over which considerably more favourable terms will apply, b) conduct three additional operations between June and December 2021 and c) introduce a new lending performance evaluation criterion for the purpose of determining the remuneration conditions of the operations. Moreover, the Governing Council decided to raise the total amount that counterparties will be entitled to borrow in TLTRO III operations from 50 per cent to 55 per cent of their stock of eligible loans as at 28 February 2019.

On 29 January 2021 the Governing Council decided that TLTRO III groups may include additional credit institutions as new group members, provided that these new members are not part of another recognized TLTRO III group, and counterparties that have been participating so far on an individual basis may form a new group. This option has only been authorized for the period before the seventh TLTRO-III.

On 30 April 2021, the Governing Council introduced further amendments to the TLTRO-III legal framework with the aim to a) review the sanctions relating to non-compliance with the deadlines set for submitting auditors' reports and assessments, b) clarify the cases in which participants are permitted to switch from individual to group participation or join existing groups as well as the procedure to be followed in such cases, c) introduce an exemption from the obligation to submit an additional auditors' assessment due to corporate reorganizations or changes in the composition of groups and d) clarify the reporting requirements and relevant interest rate calculations in the event of a change in the group composition or of a corporate reorganization occurring between 1 April 2021 and 31 December 2021.

On 27 October 2022, the Governing Council recalibrated TLTRO-III to ensure consistency with the broader monetary policy normalization process, helping to address unexpected and extraordinary inflation increases by reinforcing the transmission of policy rates to bank lending conditions. From 23 November 2022, the interest rate on all remaining TLTRO III operations is to be indexed to the average applicable key ECB interest rates from that date onward. The existing interest rate calculation method will be maintained for the period up to 22 November 2022, albeit with indexing to the applicable key ECB interest rates ending on that date. This modification will be accompanied by three additional voluntary early repayment dates introduced for banks wishing to terminate or reduce borrowings before maturity.