ECB’s first TLTRO II allotment coming next week – RBC CM

Research Team at RBC Capital Markets, suggests that banks participating in the TLTRO II operation will be able to borrow funds at the main refinancing rate, currently 0%.

Key Quotes

“For banks exceeding certain benchmarks, the interest rate charged is reduced to the -0.40% deposit rate, and those lending benchmarks do not appear particularly onerous. Based on observations from the previous TLTRO operations, and factoring in outstanding TLTROs being rolled into the new scheme, it is possible that EUR 385–440bn may be taken up at the first of four of these operations. This is also based on the assessment that the benchmarks provide for a maximum level of ‘new liquidity’ of EUR 1.2trn across the four TLTRO II operations. Allocations to Italy and Spain should account for the majority of usage of the scheme.”