Banks Urged to Disclose Use of ECB’s Ultra-Cheap Long-Term Loans

Banks should do a better job of disclosing the use of ultra-cheap funding from the European Central Bank, according to the European Union’s markets regulator.

Publishing the amount of the so-called TLTRO III loans and the related interest would help the public “evaluate the significance of financial instruments for the financial position and performance of banks,” the European Securities and Markets Authority said in a statement on Wednesday.

The ECB has made long-term loans a cornerstone of its response to the coronavirus pandemic, which seek to keep credit flowing to companies and households amid curbs on public life. Banks can obtain funding from the central bank at a rate of as low as minus 1% if they meet certain conditions, meaning they’re effectively being paid to lend.

Banks aren’t currently compelled to declare the lending they obtain from the ECB under the program, and some don’t give details.

Lenders have chosen different ways to reflect the extraordinary terms in their accounts, ESMA said. Lenders should provide “an adequate level of transparency regarding the accounting treatment of these transactions.”

“Given the overall volume of the TLTRO III operations, ESMA believes that this matter may have a material effect on the financial statements of banks and may be widespread across the EU,” it said.

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