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TLTRO III phase-out and bank lending conditions

Author

Listed:
  • Barbiero, Francesca
  • Ferrari, Alessandro
  • Maruhn, Franziska

Abstract

The recalibration of the third series of targeted longer-term refinancing operations (TLTRO III) in October 2022 led to an accelerated repayment schedule, bringing forward the fastest and largest ever decline in Eurosystem borrowing. This strengthened the transmission of policy rates to bank lending conditions. In just over two years, euro area banks repaid more than €2 trillion from TLTRO III. Banks adjusted their balance sheets to allow for the TLTRO repayments, using excess liquidity or raising additional funds via bonds and deposits. This reduction in liquidity and increased reliance on more expensive funding sources led banks to tighten their own lending conditions, thereby reinforcing the transmission of higher policy rates to bank lending. JEL Classification: E51, E52, E58, G21, G28.

Suggested Citation

  • Barbiero, Francesca & Ferrari, Alessandro & Maruhn, Franziska, 2025. "TLTRO III phase-out and bank lending conditions," Economic Bulletin Boxes, European Central Bank, vol. 8.
    • Handle: RePEc:ecb:ecbbox:2025:0008:7
    Note: 2609469
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    More about this item

    Keywords

    Bank funding; Bank lending; Liquidity; Monetary policy;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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