Business · Economy · 2 hrs ago
ECB may launch new long-term bank funding operations in 2027
The European Central Bank may start offering banks new long-term loans in 2027.
The plans are still uncertain, and the ECB has not commented on them.
The bank’s excess liquidity has fallen by more than €2 trillion, while banks have recently made greater use of its regular funding operations.
The new loans would last longer than the ECB’s weekly or three-month funding, and are expected to run for more than six months.
Unlike emergency loans used during the pandemic, they are not expected to come with especially favourable terms or conditions tied to lending.
The stated aim would be to provide banks with the liquidity they need to operate, not to stimulate the economy.
The ECB has not yet set out the loans’ terms, and the plans could change before any launch.
The European Central Bank may begin new long-term funding operations for banks in 2027, according to sources close to its Governing Council cited by Expansión.
The operations are expected to provide liquidity needed for banks to operate, rather than introduce new monetary stimulus.
They are expected to be long-term refinancing operations, without the very favourable conditions attached to earlier pandemic-era schemes.
The expected term would be longer than six months, but not so long that banks become dependent on the funding or gain excessive regulatory advantages.
The ECB declined to comment on the possibility of the new operations.
- Who
- The European Central Bank.
- What
- It may introduce new long-term refinancing operations to provide liquidity to banks.
- When
- They could begin in 2027.
- Where
- Not stated.
- Why
- To provide the banking system with the liquidity it needs to operate, rather than to introduce new stimulus.
This story does not have two clearly opposing sides.
We see serious possibilities that the new structural liquidity operations will begin in 2027. The conditions are in place, although there is still time and many things could change.
The idea is to provide the system with the liquidity it needs to operate, not to introduce new stimulus.
In the past, the ECB has varied the maturity of loans granted to banks. Only in exceptional circumstances, such as in response to the sovereign debt crisis or the pandemic, has the maturity of these operations exceeded one year.
Isabel Schnabel gave a speech outlining some features of the possible future operations, while saying the conditions to activate them were not yet in place.
Banks sharply increased their use of the ECB’s weekly liquidity operations as excess liquidity in the system fell by more than €2 trillion.
Sources close to the ECB Governing Council say the new long-term refinancing operations could begin.
- Possible launch
- 2027
- Liquidity decline
- More than €2 trillion
- Minimum expected term
- More than six months
- Earlier exceptional maturities
- More than one year during the sovereign debt crisis or pandemic
- Expected operation type
- LTROs (long-term refinancing operations)
Sources
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