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FAQs on TLTRO III operations

Collateral

Q1. What kind of collateral has to be posted for TLTRO III operations? Do the standard conditions governing other Eurosystem open market operations apply? And are there any differences now that the interest rate is negative?

TLTRO III operations are treated as normal liquidity providing reverse transactions, so the usual eligibility requirements for collateral apply.

The amount of collateral pledged must, at all times, cover the entire amount of Eurosystem refinancing provided – both principal and accrued interest. That underlying principle is independent of the sign on the interest rate. Where interest is accrued at a negative rate, that amount should be subtracted from the total amount of outstanding refinancing on a daily basis, just as accrued interest is added in the case of a positive interest rate.

Q2. Is it possible to use cash as collateral?

Cash is not an eligible asset class as defined in the relevant legal documents referred to in Q1. Therefore, on the settlement date of a refinancing operation, the counterparty is obliged to have mobilised a sufficient amount of eligible assets excluding cash to cover the TLTRO funds. However, in the case of margin calls, it is possible to transfer either eligible assets or cash.

Participation in TLTRO groups

Q3. What is the deadline for declaring a TLTRO III group?

The deadlines for declaring a TLTRO III group (or a change to a group’s composition) can be found in the official indicative calendar. Each TLTRO III operation has its own separate deadline, with groups required to submit a declaration before participating in a TLTRO III operation for the first time.

Q4. Will it be possible to add new members to a TLTRO III group for operations TLTRO III.8 to TLTRO III.10?

As a general principle, according to Article 3.2(d) the composition of a TLTRO III group shall remain unchanged for all TLTRO III operations. However, adding a new member is in general possible under the conditions spelled out in Article 3.6 or based upon an ad-hoc decision of the Governing Council pursuant to Articles 3.5 and 3.5a. On 29 January 2021, the Governing Council allowed ad hoc changes to existing TLTRO III groups on the basis of Article 3.5 of the TLTRO III Decision ahead of TLTRO III.7. This exceptional treatment will not be available for the remaining TLTRO III operations.

Q5. Can a credit institution that already participated individually in one of the TLTRO III operations form a new group for any following TLTRO III operation? Can it join an existing group?

A credit institution that already participated individually in one of the TLTRO III operations may form a new group or join an existing one if the Governing Council sees objective reasons to allow such changes, i.e. a dedicated decision by the Governing Council would be required based on Article 3.5a.

It may also form a new group under the conditions spelled out in Article 3.6a.

Q6. Is it possible to participate in the new 2021 TLTRO -III operation from June to December without having participated in the previous seven operations?

Yes, this is possible.

Borrowing allowances, bid limits and benchmarks

Q7. Which loans are eligible for TLTRO III operations?

The definition of eligible loans is unchanged from the first and second TLTRO series. Eligible loans are loans to non-financial corporations and households resident in Member States whose currency is the euro, except loans to households for house purchases.

However, in the third series, loans to the non-financial private sector that have been self securitised (i.e. where the asset-backed securities resulting from securitisation are fully retained) may, subject to certain conditions, also be included in the reference outstanding amount that is used to calculate a participant’s borrowing allowance.

Q8. What is the difference between outstanding amounts of eligible loans as at 28 February 2019 and 31 March 2019?

Outstanding amounts of eligible loans as at 28 February 2019 are used for the calculation of the reference outstanding amount, from which the borrowing allowance is derived. The borrowing allowance determines the amount that a participant can borrow under TLTRO III.

Outstanding amounts of eligible loans as at 31 March 2019 are used for the calculation of benchmark net lending and the benchmark outstanding amount – i.e. to determine lending performance and the resulting interest rates.

Q9. How are the borrowing allowance, the bid limit, benchmark net lending and benchmark outstanding amounts calculated? How do changes to a group’s composition affect their calculation?

A participant’s borrowing allowance, bid limit, benchmark net lending and benchmark outstanding amount are calculated either on an individual basis or on a group basis.

As of March 2021, the borrowing allowance is equal to 55% of the outstanding amounts of eligible loans as at 28 February 2019.

Moreover, since the third TLTRO III operation the bid limit of 10% of the total borrowing allowance has been removed. Thus, each participant’s bid limit for each TLTRO III operation is its borrowing allowance minus any amounts borrowed under previous TLTRO III operations and increased by the amounts repaid under the early repayment procedure set out in Article 5a.

For details of the calculation of benchmark net lending and benchmark outstanding amounts, please refer to Annex I to Decision ECB/2019/21.

Q10. Is it possible to allot the entire borrowing allowance to just one operation?

Yes, that is possible.

Q11. Is it true that the TLTRO III borrowing allowance (which is based on the outstanding amounts of eligible loans as at 28 February 2019) can be spread over the ten operations by each participant (either an individual participant or the lead institution in a TLTRO III group) as it sees fit?

That is correct. As of the third TLTRO III operation, there are no specific limits on bid amounts per operation, other than the fact that the total amount across all TLTRO III operations cannot exceed the borrowing allowance.

Moreover, as three new additional operations have been added to the programme, TLTRO III participants can, on a voluntary basis, repay the amounts borrowed under the first operations before maturity and request funds in the operations to be conducted in September and December 2021.

Q12. Do voluntary repayments of TLTRO III.1-6 from September 2021 also affect the borrowing allowance or bid limits for TLTRO III.9-10?

The borrowing allowance remains unaffected, while the bid limit increases as it also takes into account the voluntary repayments of TLTRO III outstanding operations.

Q13. Is the TLTRO III benchmark net lending calculated taking into account the eligible net lending of the participant within the 12 months to 31 March 2019, or based on the difference between the outstanding amounts of eligible loans on 31 March 2018 and 31 March 2019?

The benchmark is calculated taking into account the eligible net lending during the period from 1 April 2018 to 31 March 2019; please refer to Decision ECB/2019/21 for further details. Please note that the difference between the outstanding amounts of eligible loans on 31 March 2018 and 31 March 2019 may differ from the eligible net lending during the period from 1 April 2018 to 31 March 2019 in the event of adjustments to the outstanding amounts (e.g. securitisations or other loan transfers during the period, statistical reclassifications, etc.).

Interest and lending criteria

Q14. What kind of day-count convention is used to calculate interest rates?

As with other liquidity-providing operations, an actual/360 day count convention is used for the calculation of interest rates.

Q15. Which lending criteria are applied to the first seven operations?

Three lending criteria are applied to the first seven TLTRO III operations:

  1. Special reference period (SRP): A threshold of 0% relative to the benchmark net lending applies over the period from 1 March 2020 to 31 March 2021. If a participant’s eligible net lending over that period does not exceed that threshold or the participant does not include this period in its reporting scheme, the initial lending criterion over the second reference period (see below) will be assessed instead.
  2. Second reference period: Looking at whether eligible net lending from 1 April 2019 to 31 March 2021 relative to the benchmark outstanding amount (i) exceeds the threshold of 1.15%, (ii) is between 0% and 1.15%, or (iii) is less than 0%.
  3. Additional special reference period (ASRP): A threshold of 0% relative to the benchmark net lending applies over the period from 1 October 2020 to 31 December 2021.

Q16. Which lending criteria are applied to the three new operations in 2021?

Only one lending criterion will apply to these operations: a threshold of 0% relative to the benchmark that applies from 1 October 2020 to 31 December 2021 (“the additional special reference period”).

Q17. How many special interest rate periods are included in TLTRO III?

There are two special interest rate periods:

  1. special interest rate period (SIRP): From 24 June 2020 to 23 June 2021;
  2. additional special interest rate period (ASIRP): From 24 June 2021 to 23 June 2022.

Q18. How will the interest rate applied to the first seven TLTRO III operations be calculated?

Details of the calculation of interest rates are specified in Decision ECB/2019/21 (as amended by Decision ECB/2020/25 and by Decision ECB/2021/3), as well as being set out in the ECB press releases published on 12 March, 30 April and 10 December 2020.

The interest rate will be the average of the rates on main refinancing operations (MROs) over the life of the relevant TLTRO III operation (with the exception of the period from 24 June 2020 to 23 June 2022, when it will be 50 basis points lower than that average).

Subject to participants meeting the lending performance thresholds specified in Decision ECB/2019/21 (as amended by Decision ECB/2020/25 and ECB/2021/3), the interest rate could be as low as the average deposit facility rate (DFR) over the life of the relevant TLTRO III operation (with the exception of the period from 24 June 2020 to 23 June 2022, when it could be 50 basis points lower than that average but not higher than -1%).

  • If the participant exceeds the lending threshold of 0% during the special reference period (1 March 2020 to 31 March 2021) and during the additional special reference period (1 October 2020 to 31 December 2021), the interest rate shall be the average of the deposit facility rate (DFR) over the life of the respective TLTRO III, except for the period from 24 June 2020 to 23 June 2021 (special interest rate period – SIRP) and the period from 24 June 2021 to 23 June 2022 (additional special reference period – ASRP), during which it shall be 50 basis points lower than the average DFR during the respective period, but not higher than -1%. The result of the assessment of the second reference period (1 April 2019 to 31 March 2020) is not considered in this case.
  • If the participant exceeds the lending threshold of 0% during the special reference period but does not exceed the lending threshold of 0% during the additional special reference period, the interest rate shall be the average of the deposit facility rate over the life of the respective TLTRO III, except for special interest rate period during which it shall be 50 basis points lower than the average DFR during the respective period, but not higher than -1% and except for the additional special interest rate period during which it shall be the lower between the average MRO rate during the additional special interest rate period minus 50 basis points and the DFR during the life of the TLTRO III operation.
  • If the participant does not exceed the lending threshold of 0% during the special reference period but exceeds the lending threshold during the additional special reference period, the interest rate shall be calculated as follows:
    • From the start of the operation until 23 June 2020: if the participant has exceeded the lending performance threshold during the second reference period, the interest rate shall be the one derived by the assessment of the benchmark during the second reference period. If such participant has not exceeded the lending performance threshold during the second reference period, the interest rate shall be the average MRO rate during the life of the respective TLTRO III.
    • During the special interest rate period (24 June 2020 to 23 June 2021): the interest rate shall be the lower between the average MRO rate minus 50 basis point during the special interest rate period and the one derived by the assessment of the benchmark during the second reference period.
    • During the additional special interest rate period (24 June 2021 to 23 June 2022), the interest rate shall be 50 basis points lower than the average DFR during the respective period, but not higher than -1%.
    • After the additional special interest rate period (from 24 June 2022 until maturity), the interest rate shall be the average interest rate on the deposit facility over the life of the respective TLTRO III operation.
  • If the participant does not exceed the benchmark during the special and additional special reference periods but it exceeds the benchmark during the second reference period, the interest rate shall be:
    • From the start of the operation until 23 June 2020 and from 24 June 2022 until the maturity of the operation, the interest rate shall be the one derived by the assessment of the benchmark during the second reference period.
    • During the special rate period: the interest rate shall be the lower between the average MRO rate minus 50 basis point during the special interest rate period and the one derived by the assessment of the benchmark during the second reference period.
    • During the additional special interest rate period, the interest rate shall be the lower between the average MRO rate minus 50 basis point during the additional special interest rate period and the one derived by the assessment of the benchmark during the second reference period.
  • If the participant does not exceed the benchmark during any of the assessment periods (second, special and additional special), the interest rate shall be the average of the main refinancing operation rate over the life of the respective TLTRO III (except for the period from 24 June 2020 to 23 June 2022 in which it shall be 50 basis points lower than the average MRO rate during this period).

Q19. How will the interest rate applied to the last three TLTRO III operations be calculated?

The details of the actual interest rate are specified by the amending Decision ECB/2021/3 along the lines of the press release of 10 December 2020.

For participants exceeding the new lending threshold of 0% during the additional special interest rate period, the interest rate applied for the period from 24 June 2021 to 23 June 2022 shall be 50 basis points lower than the average DFR during the same period, but not higher than -1%, while the interest rate applied after 23 June 2022 shall be the average of the deposit facility rate over the life of the respective TLTRO III.

For participants not exceeding the new lending threshold of 0% during the additional special interest rate period, the interest rate applied for the period from 24 June 2021 to 23 June 2022 shall be 50 basis points lower than the average MRO rate during the same period, while the interest rate applied after 23 June 2022 shall be the average of the MRO rate over the life of the respective TLTRO III.

The second reference period and the special reference period will not be taken into account for these three operations.

Examples and decision tree on interest rates

Further details regarding the calculation of interest rates are set out in Annex I to Decision ECB/2019/21 (as amended by Decision ECB/2020/25 and Decision ECB/2021/3).

Q20. If a counterparty (partially or totally) repays its TLTRO III.1 to III.5 amounts in September 2021 and participates in the TLTRO III.9 or TLTRO III.10 operation with the same amount, what interest rate will it receive during the additional special interest rate period (24 June 2021 to 23 June 2022) if it exceeds the lending performance threshold of 0% during the additional special reference period (1 October 2020 to 31 December 2021)?

For these amounts, the participant will receive:

  • From 24 June 2021 until the repayment: the lower between the average MRO rate during the same period -50 basis points and the interest rate derived from the assessment of the second and special reference period will apply. Amounts borrowed in these or any other operation cannot be granted the average rate of the DFR during the same period -50 basis points with a maximum of -1% if they are repaid before June 2022, as the assessment of the additional special interest rate period has not yet been done. The same calculation, therefore, applies if early repayments take place in December 2021 or March 2022.
  • From the settlement date of TLTRO III.9 or TLTRO III.10 until 23 June 2022, the amounts borrowed shall receive an interest rate equal to the average rate of the DFR during the same period -50 basis points with a maximum of -1%.

Q21. If the DFR were to increase in the future, such that the average DFR over the period from 24 June 2020 to 23 June 2021 and/or the additional special interest period (from 24 June 2021 to 23 June 2022) stood at -0.45%, would an interest rate of -0.95% (i.e. -0.45% minus 50 basis points) be applied to TLTRO III participants meeting the lending criterion during the special reference period from 1 March 2020 to 31 March 2021 and/or the additional special reference period (1 October 2020 to 31 December 2021)?

No, the interest rate would be -1%. If a participant meets the special reference period lending criterion, the interest rate applied over the period from 24 June 2020 to 23 June 2021 cannot be higher than -1%, with the average DFR over the life of the relevant TLTRO III operation applying for the remainder of the life of the operation.

If this happens during the additional special interest rate period (between 24 June 2021 and 23 June 2022), the interest rate during this period would also be -1%.

Q22. If the DFR were to fall in the future, such that the average DFR over the period from 24 June 2020 to 23 June 2021 and/or the period from 24 June 2021 to 23 June 2022 stood at -0.55%, which interest rate would be applied over the period from 24 June 2020 to 23 June 2021 for TLTRO III participants meeting the lending criterion during the special reference period (1 March 2020 to 31 March 2021) and/or the additional special reference period (1 October 2020 to 31 December 2021)?

The interest rate applied over the period from 24 June 2020 to 23 June 2021 would be -1.05% (i.e. -0.55% minus 50 basis points), with the average DFR over the life of the relevant TLTRO III operation applying for the remainder of the life of the operation.

If this happens during the additional special interest rate period (between 24 June 2021 and 23 June 2022), the interest rate during this period would also be -1.05%.

Q23. Is there still a progressive interest rate incentive, or are TLTRO III interest rates now always binary (i.e. either less favourable or more favourable)? If there is a progressive interest rate incentive, what is the lower bound?

Yes, there are still instances where the interest rate decision is not binary. That will be the case where counterparties participating in the first seven operations do not hit the lending threshold of 0% from 1 March 2020 to 31 March 2021 (“the special reference period”). In that case, the initial modified lending criterion applies, which remains progressive. The lowest achievable interest rate in that instance is the average DFR over the life of the operation.

For the last three operations, the incentive adjustment for the TLTRO III interest rate is binary.

Q24. Will the new pricing also be applied retroactively to TLTRO III operations, which were allotted prior to the announcement of the amended methodology for the calculation of interest rates?

Yes, the new pricing will be applied to all TLTRO III operations, including those allotted before the announcement of the new pricing. Meeting the conditions of the additional special interest rate period will only impact the interest rate as of 24 June 2021.

Q25. How and when will TLTRO III participants be repaid if the final interest rate applicable to a TLTRO III operation is below the average MRO rate over the life of that operation (especially if it is a negative interest rate)?

Article 5 of Decision ECB/2019/21 states that information on interest rates related data will be communicated to participants in September 2021 and in June 2022, in accordance with the official indicative calendar published on the ECB’s website, and the final interest rate for each operation will be communicated to participants before (but close to) the relevant maturity date.

Interest will be settled in arrears on the maturity of each TLTRO III operation or on early repayment. If the repayment occurs before interest rate data are communicated the counterparty is assumed not to have met the relevant lending assessment criterion.

If the applicable interest rate is negative, counterparties can either repay the outstanding borrowing amount minus interest, or they can repay the outstanding borrowing amount and receive the interest at the same time, depending on the set-up at the relevant national central bank (NCB).

Q26. When will NCBs inform counterparties about the final interest rate and data relating to its calculation?

NCBs cannot communicate the final interest rate for an operation until they know the average MRO rate and the average DFR over the life of that operation, or until a voluntary early repayment is made as of September 2021.

Q27. Will new loans that are granted after 31 March 2019 with a maturity date before 31 March 2021 contribute to the achievement of the “discount” on the interest rate?

No. Those loans will have a neutral impact on eligible net lending under the initial lending criterion, as they will be accounted for both as gross lending and as repayments during the second reference period (1 April 2019 to 31 March 2021); see also Annex II to Decision ECB/2019/21. They may (negatively) affect the new lending criterion if they are granted before 1 March 2020 and mature between 1 March 2020 and 31 March 2021.

They might also affect the additional lending criterion negatively during the additional special reference period if they were granted before 1 October 2020 and mature between 1 October 2020 and 31 December 2021.

Q28. Will new loans granted after 31 March 2021 contribute to the achievement of the “discount” on the interest rate?

Yes. All the new loans granted between 1 October 2020 and 31 December 2021 will contribute to determining the interest rate applied during the additional special interest rate period.

Q29. Will the “discount” on the interest rate be calculated in a way that takes account of banks that are in the process of deleveraging?

Yes. There are two ways of calculating benchmark net lending: one for banks with zero or positive eligible net lending in the period from 1 April 2018 to 31 March 2019, and another for banks with negative eligible net lending in that period. That benchmark is taken into account for all three lending criteria.

Q30. Does the lending threshold of 0% apply only to the periods from 1 March 2020 to 31 March 2021 and from 1 October 2020 to 31 December 2021, or the whole of the period from 1 April 2019 to 31 March 2021?

It only applies to the special reference period – i.e. the period from 1 March 2020 to 31 March 2021 – and for the additional special reference period, i.e. the period between 1 October 2020 and 31 December 2021. For the second reference period – i.e. the period from 1 April 2019 to 31 March 2021 – the initial modified lending criterion applies, i.e. between 0% and 1.15%.

Q31. In case a corporate reorganisation involving TLTRO III participants in the first seven TLTRO III operations occurs after 31 March 2021 but before 31 December 2021, how would the lending performance be evaluated?

Article 6a of the TLTRO III Decision specifies the following details:

  • for the second and the special reference period, the eligible net lending of each individual institution would be assessed against their respective individual benchmarks;
  • for the additional special reference period the resulting institution would need to send a revised first report combining the data of the involved institutions which will be assessed against the eligible net lending of the combined institution during the additional special reference period;
  • if a more favourable rate would have been warranted on the basis of the relevant data for the second reference period and the special reference period depending on the participant’s individual lending performance(s), these individual performances would be assessed against the respective benchmarks.
Early repayment

Q32. Is voluntary early repayment possible under TLTRO III?

Yes. Article 5a of Decision ECB/2019/21 (as amended by Decision ECB/2020/13 and by Decision ECB/2021/3) provides that:

  • as of September 2021, participants in the first seven operations will, on a quarterly basis, have the option of terminating or reducing the amount of a TLTRO III operation before maturity, provided that at least one year has passed since the settlement date of the TLTRO III operation in question;
  • starting from June 2022 participants in the new additional operations have, on a quarterly basis, the option of withdrawing from or reducing the amount borrowed in the new TLTRO III operations before maturity.
  • Q33. Can an institution participating in TLTRO III operations voluntarily repay only a fraction of its outstanding amount under TLTRO III? Can an institution spread the repayment of outstanding amounts over time?

    Outstanding amounts under TLTRO III can be repaid in part or in full on any of the dates that are listed in the official indicative calendar posted on the ECB’s website. Counterparties can use each and any of these dates.

    Q34. May a counterparty participate in voluntary repayments in the first seven TLTRO III operations and roll-over with the new additional TLTRO III operations?

    Yes, as early repayments of the first seven TLTRO III operations and of the new additional TLTRO III will have the same value date.

    However, that counterparty cannot get the average DFR -50 basis points from 24 June 2021 until the settlement date of the repayment even if it could theoretically have met the lending criterion during the additional special reference period (see Q20).

    Q35. May a counterparty that had to mandatorily (partly) repay their outstanding amounts in TLTRO III operations take up those amounts in future TLTRO III operations?

    No. Only voluntary repayments can lead to an increasing bid limit. Amounts which had to be repaid mandatorily due to non-compliance or collateral insufficiency cannot be borrowed again.

    Q36. In the event of repayment before June 2022, which interest rate will apply during the additional special interest rate period (from June 2021 to June 2022)?

    TLTRO III repayments before June 2022 will not receive the average DFR minus 50 basis points during the additional special interest rate period, even if theoretically the counterparty could have met the additional special lending criteria, as these repayments will take place before the audited data on the additional reporting period are to be transmitted to NCBs and the information about the interest rate applying to the additional special interest rate period is communicated to counterparties by NCBs.

    Reporting requirements

    Q37. What does the reporting format look like?

    Reporting template B is used for the calculation of the benchmark net lending and the assessment of the lending performance threshold. It needs to be completed for the period from 1 April 2018 to 31 March 2019 (first reference period) for the calculation of the benchmark net lending and for the period from 1 April 2019 to 31 March 2021 (second reference period) in order to assess the modified initial lending threshold between 0% and 1.15%. In addition, if a counterparty would like to benefit from the additional discount granted by the Governing Council on 30 April 2020 and 10 December 2020, it also needs to provide the template referring to the period from 1 March 2020 to 31 March 2021 (the special reference period) and the third report from 1 October 2020 to 31 December 2021 (the additional special reference period) in order to assess the lending thresholds of 0%.

    In order to allow self-securitised loans to be taken into account in the reference outstanding amount (which is the sum of outstanding amounts of eligible loans and outstanding amounts of self-securitised eligible loans as at 28 February 2019), a new template (Reporting Template A) was introduced by Decision ECB/2019/21 in order to account for the optional inclusion of self securitised loans in the reference outstanding amount via supplementary items.

    Q38. If a participant in one of the first seven operations provides the report for the period between 1 March 2020 and 31 March 2021 (special reference period) and exceeds the relevant benchmark, the report for the period between 1 April 2019 and 31 March 2021 (second reference period) will not be used to calculate the interest rate. Is the report on the second reference period still mandatory?

    Yes, the report for the period between 1 April 2019 and 31 March 2021 is mandatory for analytical purposes.

    The benefits stemming from the special reference period will remain even if the report is not provided, but the counterparty shall incur a penalty of €5,000.

    Q39. If a counterparty exceeds the benchmark between 1 March 2020 and 31 March 2021, the report for the period between 1 April 2019 and 31 March 2021 will not be used to calculate the interest rate. In this case, is the auditor’s evaluation expected for this period or only for the special reference period between 1 March 2020 and 31 March 2021?

    In this case, the auditor’s evaluation of the second report mandatorily includes only the results for the special reference period between 1 March 2020 and 31 March 2021. However, the counterparty bears the risk that if, after checking the auditor’s evaluation, the data of the special reference period are wrong and the benchmark during this period is not exceeded, the lack of the auditor’s evaluation of the second reference period would prevent a favourable rate from being applied based on the assessment of the second reference period.

    Q40. What are the reporting obligations of an institution participating in the TLTRO III series?

    Article 6 of Decision ECB/2019/21 states that participants are required to submit data to the relevant NCB in accordance with the TLTRO III calendar published on the ECB’s website.

    All participants must submit the “first report” which includes the reference outstanding amount for the purposes of establishing the participant’s borrowing allowance and bid limits, and data relating to the first reference period for the purpose of establishing the participant’s benchmarks.

    Participants that first participate in TLTRO III.1-7 must submit the “second report” which includes data relating to the second reference period for the purpose of determining the applicable interest rates. The second report also optionally includes data relating to the special reference period which are provided on a voluntary basis and would also contribute to determining the applicable interest rates.

    The “third report”, which includes data relating to the additional special reference period for the purpose of determining the applicable interest rates for the additional special interest rate period, must be provided by all participants. In cases where counterparties voluntarily repay all their operations in September 2021, December 2021 or March 2022 they do not need to provide the third report.

    Participants are expected to submit accurate and complete data in accordance with the TLTRO III official indicative calendar published on the ECB’s website. For details of the required evaluation of data by an external auditor, please see Article 6(6) of Decision ECB/2019/21.

    Any corrections to those reports in the event of changes to a group’s composition or a corporate reorganisation should be communicated to the relevant NCB under the conditions specified in Article 6. Additionally, any corrections to those reports where a participant notices an error should be communicated to the relevant NCB without delay in accordance with Article 7.

    External auditing

    Q41. How will the data reported by institutions participating in TLTRO III operations be audited?

    Article 6 of Decision ECB/2019/21 states that the quality of the data contained in the two reports which a participant must submit to the relevant NCB for the purposes of establishing its borrowing allowance, benchmark and interest rate must be evaluated by an external auditor. Article 6 also spells out the various elements that the auditor’s evaluation should contain.

    In light of the deadlines set out in the official indicative calendar published on the ECB’s website, the external auditor may evaluate the data in the first report, along with other aspects, as part of its audit of the participant’s annual financial statements. The results of that first evaluation must be submitted by the deadlines specified in the official indicative calendar. Please note the difference in deadlines depending on whether a participant firstly participates in the first three TLTRO III operations (deadline of 21 January 2021) or in TLTRO III.4-7 (deadline 16 July 2021) or from TLTRO III.8 onwards (deadline 6 April 2022).

    The results of the external auditor’s evaluation of the second report must be submitted together with the second report by 17 August 2021.

    The results of the external auditor’s evaluation of the third report must be submitted together with the third report by 17 May 2022.

    Specific deadlines are envisaged for auditors’ evaluation of additional items relating to the inclusion of self-securitised loans.

    Q42. Will it be possible to have a derogation regarding the deadlines for submitting the first, second and third audit evaluations as spelled out in the TLTRO III calendar?

    The results of the auditor’s evaluations must be submitted by the deadlines specified in the TLTRO III calendar published on the ECB’s website. In the event of late submissions, Article 7 of the TLTRO III Decision specifies financial penalties that increase with the duration of the observed delay. If a counterparty has not provided the audit evaluation 14 days after the initial deadline for the auditor’s evaluation of the first report, it will need to repay the operations to which the specific deadline applied. If a counterparty has not provided the audit evaluation (or the report) 14 days after the initial deadline for the second or third report, the less favourable interest rate will apply for the relevant period.

    Q43. If a counterparty submits the reporting template but ultimately decides not to participate in any TLTRO III operations, does it still have to submit the auditor’s evaluation?

    No. An auditor’s evaluation is only necessary if the counterparty participates in an operation.

    Q44. If a counterparty’s net lending does not meet the initial modified lending criterion, is it necessary to submit an auditor’s evaluation of the second report?

    No. An auditor’s evaluation of the second report will only be necessary if the counterparty has exceeded its benchmark outstanding amount of eligible loans. Nevertheless, the second report must still be provided, or else penalties will be imposed (see Article 7(1)(c) of Decision ECB/2019/21).

    Q45. If a counterparty’s net lending does not exceed the lending threshold for the special reference period, will it be necessary to carry out the auditor’s evaluation of data related to that period?

    No, the auditors’ evaluation is only necessary if the counterparty exceeds the relevant threshold in order to obtain the benefits. No sanctions are envisaged if the counterparty decides not to provide data on the special reference period.

    Q46. If a counterparty’s net lending exceeds the lending threshold for the special reference period, will it be necessary for the auditor’s evaluation of the second report to provide results of the audit of data related to the second reference period?

    No, the auditors’ evaluation of the second reference period will not be necessary if the counterparty exceeded the relevant threshold of the special reference period in order to obtain the benefits. However, the participant bears the risk that, if the threshold is not met for the special reference period, the data for the second reference period cannot be used for an assessment of the performance in the second report.

    Q47. If a counterparty’s net lending does not exceed the lending threshold for the additional special reference period, will it be necessary to carry out the auditor’s evaluation of the third report?

    No, the auditors’ evaluation will only be necessary if the counterparty exceeded its benchmark outstanding amount of eligible loans.

    Q48. If a counterparty’s net lending does not exceed the lending threshold for the additional special reference period, will it be necessary to provide data on this period?

    Yes, otherwise there will be sanctions in accordance with Article 7(1)(f) of Decision ECB/2019/21. Those sanctions apply to participants of all TLTRO operations.

    Q49. Is it possible to change TLTRO III group compositions after the December 2020 Governing Council decisions on TLTRO III? Is it possible to make changes in the group composition for the additional TLTRO III (8-10) operations? Will a new deadline for the first report’s audit evaluation be introduced for such cases?

    In line with the Governing Council decision on 29 January 2021, changes in TLTRO III group compositions were allowed until 15 February 2021 (ahead of TLTRO III.7) by adding to a TLTRO III group new credit institutions that were not yet participating in TLTRO III or that were individually participating in previous TLTRO III. Individual participants can also join non-TLTRO III participants or other TLTRO III participants to form a TLTRO III group. Those non-participant credit-institutions must fulfil the requirements of Article 3.3 of Decision ECB/2019/21 as amended.

    After 15 February 2021, there is no possibility of changing TLTRO III groups except for the circumstances provided in Article 3.6 of Decision ECB/2019/21. There is also no specific possibility of changing TLTRO III groups due to the participation in the last three TLTRO III operations.

    The relevant factor in determining the deadline for providing the auditor’s evaluation of the first (revised) report is the timing of the first participation in the new composition according to the official indicative calendar.

    In the case of already existing participants joining the new operations following a corporate reorganisation after 1 April 2021, revisions to the first report will need to be submitted by the deadlines specified in the official indicative calendar. In such cases the new/updated auditor’s evaluation must be provided by the new deadline specified for the new operations (6 April 2022).