Donate to Remove ads

Got a credit card? use our Credit Card & Finance Calculators

Thanks to johnstevens77,Bhoddhisatva,scotia,Anonymous,Cornytiv34, for Donating to support the site

ECB negative interest rate loans

The Big Picture Place
ursaminortaur
Lemon Half
Posts: 6945
Joined: November 4th, 2016, 3:26 pm
Has thanked: 449 times
Been thanked: 1718 times

ECB negative interest rate loans

#319386

Postby ursaminortaur » June 18th, 2020, 12:46 pm

In response to the pandemic the ECB is providing loans to banks at negative interest rates of minus 1% whilst maintaining its main deposit rate at minus 0.5%.


https://www.ft.com/content/132f875c-c821-4045-bf2b-6615b55f2b83

Banks rush to borrow record €1.3tn at negative rates from ECB
Central bank offers ultra-cheap loans to prevent pandemic becoming credit crunch
.
.
.
The ECB said on Thursday that banks had applied to borrow €1.31tn under its main refinancing scheme, which will lend them money over three years at ultra-cheap rates as low as minus 1 per cent, providing they meet certain lending thresholds.

Given the ECB’s main deposit rate is minus 0.5 per cent, the ultra-cheap lending is effectively a subsidy for the banking system and provides further evidence of how the ECB is pulling out all the stops to try to prevent the pandemic causing a credit crunch.

The banks are due to use about €765bn of the ultra-cheap loans to repay earlier ECB loans that are about to mature. But they are expected to use much of the remaining €543bn to buy bonds issued by their own governments — earning them an instant profit on the “carry trade” between the negative rate from the ECB and the higher yield on government bonds.

Return to “Macro and Global Topics”

Who is online

Users browsing this forum: No registered users and 10 guests