ECB May Consider TLTROs for Housing Loans, Societe Generale Says

(Bloomberg) -- The European Central Bank could consider opening its next round of longer-term loans for banks to include mortgage lending to prop up consumer confidence in the euro area, according to Societe Generale SA.

Anatoli Annenkov, an economist at the French bank in London, predicts the ECB will offer a third program of targeted longer-term refinancing operations sometime between March and September, with a maturity of two to three years.

“The economic slowdown has been longer and deeper than expected and poses a threat to investment, arguing for an unchanged balance sheet for longer,” Annenkov wrote in a note on Thursday. “High uncertainty is now threatening confidence and the credit outlook, calling for early ECB action, but the ECB may prefer to await further data before acting.”

While speculation has been rife that the ECB will offer a new round of financing for banks, President Mario Draghi said in January policy makers will need to have a monetary policy case first before they decide to act. The current program of more than 720 billion euros ($813 billion) in four-year loans offered banks incentives to boost credit to companies and consumers, but it excludes mortgages. Those loans will start to mature next June.

Some policy makers could take issue with Annenkov’s idea as easier access to mortgage lending could fuel further price gains. Central bank Governor Klaas Knot urged action on Monday to prevent large swings in property prices, warning that they could damage the Dutch economy.

The ECB could still pass on another round of lending if the economic situation begins to improve, Annenkov said. Another tool that policy makers may consider would be to offer regular refinancing operations to banks for as long as two years “in view of structural changes to markets and regulation,” he wrote.

To contact the reporter on this story: Piotr Skolimowski in Frankfurt at pskolimowski@bloomberg.net

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Brian Swint, Kevin Costelloe

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