This paper analyses the effects of the first two Targeted Longer-Term Refinancing Operations (TLTROs) announced in June 2014, evaluating moreover whether the transmission mechanism is influenced by local level bank competition. The estimates are based on a quarterly dataset including bank-firm term loan relationships between the start of 2014 and the middle of 2015 in Italy.
The results show that, after taking into account firm characteristics, banks participating in the TLTROs reduced the interest rate on term loans on average by approximatively 20 basis points more than non-participating banks. The effect is about 5 per cent of the average cost of credit in the sample. In addition, we show that the impact is bigger and starts in advance in the provinces where the bank credit market is more competitive