The European Central Bank has forwarded a new €45.3 billion to lenders in the Eurozone at a zero interest rate in the second round of its quantitative easing program aimed at strengthening liquidity and encouraging borrowing in the real economy.
Interest in long-term refinancing (TLTRO-II) was higher compared to the previous operation in June when the central bank forwarded €31 billion to banks at no interest, with a focus on capital markets in Spain and Italy.
The cost of four-year borrowing could fall to a level of minus 0.4 percent if banks accelerate the lending of loans, which means that the ECB would pay financial institutions a fee for taking cash.
The goal of the ECB program, which offers banks and financial institutions money in proportion to the volume of loans forwarded to companies or households, is to stimulate inflation and economic growth, and its importance is increasing as the deadline for purchasing private and public securities approaches in March 2017, writes Bloomberg.
ECB Chief Mario Draghi assessed on September 8 that the ability of monetary policy to generate demand for lending “has never worked better” and that TLTRO-II and the more modest TLTRO-I have improved banks’ balance sheets. Regional borrowing by non-financial corporations rose by 1.9 percent in July compared to the same period last year, while the number of loans forwarded to households increased by 1.8 percent.
