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What are targeted longer-term refinancing operations (TLTROs)?

30 March 2021

Targeted longer-term refinancing operations (TLTROs) are central to making sure that our monetary policy reaches people. Through TLTROs, the ECB offers longer-term loans to banks at favourable costs and encourages them to lend to businesses and consumers in the euro area. This keeps borrowing costs low and supports spending and investments.

How does it work? TLTROs are different from our main refinancing operations in three distinctive ways:

  1. TLTROs are specifically targeted – as the name says – at maintaining or increasing banks’ lending to businesses and consumers.
  2. TLTROs are conditional. Banks only get cheap credit from the ECB if they actually pass the money on to the people and businesses in the form of loans. The maximum amount offered is capped at a share of banks’ loans to companies and households (excluding loans for house purchases). The more a bank granted in loans to companies and households before the start of the operations, the more it can borrow under TLTROs.
  3. TLTROs offer longer-term loans. They only have to be paid back after four years, much longer than the ECB’s standard liquidity-providing instruments. This provides banks with stable and dependable funding.

Why do we offer TLTROs?

TLTROs help to keep the economy going and ensure that businesses and households continue to get the funds they need to stay afloat and invest. TLTROs are one of the main instruments for the ECB to preserve favourable financing conditions. They provide banks with funding certainty at a favourable cost so long as they support lending to firms and households. TLTROs encourage lending when banks would otherwise be more hesitant to give out loans.

By encouraging bank lending, TLTROs ensure that the economy benefits from our monetary policy. The loans to companies and households finance investment and support spending on goods and services, especially when the economy faces major headwinds. This in turn helps us to bring inflation back towards our aim of below, but close to, 2%.

The ECB has launched three series of TLTROs: TLTRO I in 2014, TLTRO II in 2016 and TLTRO III in 2019.

TLTRO III plays an important role in weathering the coronavirus crisis

TLTRO III is one of our key measures to fight the impact of the coronavirus crisis on the economy. Banks can borrow funds from the ECB at a favourable rate as low as -1%. This means they are offered at 0.5 percentage points below the ECB’s deposit facility rate. Banks are rewarded with this lower interest rate if they keep lending to businesses and households. We are offering banks these more attractive terms from 24 June 2020 until 23 June 2022.

This encourages banks to lend more and pass on these attractive terms to companies and households to help them better weather the coronavirus crisis. The third TLTRO programme consists of ten operations, each with a maturity of three years (previous TLTROs had a maturity of up to four years). This means that banks have three years to pay back what they borrowed. TLTRO III operations started in September 2019, before the coronavirus crisis hit the economy. The programme was then adapted to respond to the impact of the crisis in March, April and again in December 2020. The last operation will be conducted in December 2021.


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