ECB announces details of new targeted longer-term refinancing operations (TLTRO III)
● Operations aim to preserve favourable bank lending conditions and to support the accommodative stance of monetary policy
● TLTRO III interest rate will be set at 10 basis points above the average MRO rate over the life of each operation
● For counterparties exceeding their lending benchmark a lower interest rate will apply, which can be as low as the average deposit facility rate plus 10 basis points.
The Governing Council of the European Central Bank (ECB) today decided on key parameters of the new series of targeted longer-term refinancing operations (TLTRO III), including the interest rates that will be charged. The quarterly operations, first announced in March, will help preserve favourable bank lending
conditions and support the accommodative stance of monetary policy. They will start in September 2019 and end in March 2021, and have a maturity of two years each.
The interest rate for each operation will be set at a level of 10 basis points above the average rate applied to the Eurosystem’s main refinancing operations (MROs) over the life of the respective TLTRO.
For counterparties whose eligible net lending between the end of March 2019 and the end of March 2021 exceeds their benchmark net lending, the rate applied to TLTRO III operations will be lower, and can be as low as the average interest rate on the deposit facility prevailing over the life of the respective operation plus 10 basis points.
Counterparties will receive the maximum rate reduction if they exceed their benchmark stock of eligible loans by 2.5% as at 31 March 2021. Below this limit, the size of the decrease in the interest rate will be graduated linearly depending on the percentage by which a counterparty exceeds its benchmark stock of eligible loans.