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 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 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, starting in September 2021. 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.

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 extend the period over which considerably more favourable terms will apply by twelve months, to June 2022, and to conduct three additional operations between June and December 2021. 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.

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 2022, 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, except for the period from 24 June 2020 to 23 June 2021, in which a reduction of 50 basis points will be applied. This reduction will also apply to the period from 24 June 2021 to 23 June 2022 for counterparties whose eligible net lending between 1 October 2020 and 31 December 2021 reaches the lending performance threshold.

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, 30 April 2020 and 10 December 2020, as well as in their special section on TLTRO operations.