To date, Greece’s four systemic banks have drawn liquidity totaling 8.4 billion euros through the instruments provided by the European Central Bank known as targeted longer-term refinancing operations (TLTRO), and they will draw more.
They are low-interest long-term loans that are issued to the banks as an incentive to increase the financing of businesses and households. The rate on these loans is currently negative, at -0.4 percent, which means that the ECB practically pays the banks to fund the economy.
Bank data show that Alpha has drawn loans of 3.1 billion euros from the Eurosystem, National follows with 2.3 billion, Piraeus with 1.7 billion and Eurobank with 1.3 billion euros.
To draw cheap liquidity, lenders mainly offer bonds as collateral, and according to estimates by bank officials, the activation of the new TLTRO program the ECB announced this week will be used by local credit institutions either to extend the existing credit, depending on the terms, or to draw fresh liquidity.
“The conditions of the new round of TLTRO funding announced by the ECB are positive for euro area banks,” commented Fabio Ianno, vice president and senior credit officer at Moody’s. “Despite the conditions being less advantageous than the previous operations, they remain very favorable compared to alternative market funding sources. This is particularly the case for Southern European banks, which are more reliant on ECB funding and have a higher cost of market funding than their Northern European peers,” he added.
Contrary to typical monetary policy interventions, the amount of funding banks can receive through the TLTRO programs and the cost of borrowing depend on the amount of loans they issue to the real economy.