Negative ECB Loan Rates Likely, But Spanish and Italian Banks to Face Tighter Access

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The European Central Bank has announced it will launch its third round of targeted long-term refinancing operations in September, but details are scarce and all eyes are now on this week’s monetary policy meeting for more information. The main focus will be on what interest rate will be charged: Bloomberg Economics anticipates it’s likely to end up being as low as the deposit rate for some portion of the borrowing, with the ECB also confirming that the borrowing capacity will consider the overall TLTRO balance. This will substantially reduce access for large TLTRO-II borrowers, particularly in Spain and Italy.

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