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 to households for residential mortgages).

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 will feature built-in incentives for credit conditions to remain favourable. 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 March 2020, in order to address the adverse impact of the coronavirus pandemic, 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. In April 2020, an additional decision was taken by the ECB to  recalibrate TLTRO-III conditions through a further reduction in the interest rates and an improvement of the incentive mechanism.

Each operation will have a duration of three years and will be conducted at a rate equal to the interest rate on the main refinancing operations over the life of the respective TLTRO-III, with the exception of the period from 24 June 2020 to 23 June 2021 in which there will be a further reduction of 50 basis points. For counterparties whose eligible net lending between 1 March 2020 and 31 March 2021 equals or exceeds their benchmark net lending, the rate applied to TLTRO-III operations will be lower, and may be as low as the average rate on the deposit facility over the life of the respective operation: also in this case a reduction of 50 basis points will be applied in the period from 24 June 2020 to 23 June 2021.

Further details about the TLTRO-III programme can be found in the ECB's press releases, published on 6 June 2019, 12 September 2019, 12 March 2020 and 30 April 2020, as well as in their special section on TLTRO operations.