The ECB’s targeted long-term re-financing programmes and its effect on bank lending
What effect did the TLTRO programme launched by the ECB have on bank lending?
In a market economy, central banks have only very limited influence on what commercial banks use the liquidity provided by the central bank for. For example, the real economic effect of an interest rate cut can largely fizzle out if banks do not translate it into increased lending to the real economy.
To counter this phenomenon, a class of long-term refinancing operations has been developed by the ECB in recent years to support lending to the real economy through targeted incentives. These so-called targeted longer-term refinancing operations were first decided by the ECB Governing Council in 2014.
This Technical Note examines the effects of the ECB programme on commercial banks’ lending to the real economy.
