Just a few quick remarks on banks meeting the ECB’s threshold for the TLTRO iii loans. Recall that if banks manage to keep the size of their loan stable compared to the baseline set by the ECB, banks receive 100bps over the notional amount they borrowed for a limited amount of time. At the December ECB meeting Lagarde & Co believe it wise to increase the duration of the 100bps teaser rate by twelve months to June 2020/June 2022 from June 2020/June 2021. The thinking is that if the teaser rate expires, banks will have too much of an incentive to repay a chunk of the 1.8 trillion euros.

 

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