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Who takes the ECB’s targeted funding?

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  • Vergote, Olivier
  • Sugo, Tomohiro

Abstract

This paper investigates motives of banks to borrow funds from the ECB through its first two series of targeted longer-term refinancing operations (TLTROs) allotted between September 2014 and March 2017. We quantify that the top-three parameters that determine banks’ take-up decisions are the price of the operation, the amount of eligible collateral of the bank, and the composition of that collateral. In particular, the opportunity for banks to transform their less liquid assets partly into liquid central bank reserves by pledging these assets as collateral with the central bank is a strong motive for take-up and suggests that accepting a broad set of collateral was important for the monetary easing provided by TLTROs. In addition, we find that the conditions attached to TLTRO participation and take-up played an important role in creating broad-based participation across banks of different financial strength and size. JEL Classification: C23, C24, E52, E58, G21

Suggested Citation

  • Vergote, Olivier & Sugo, Tomohiro, 2020. "Who takes the ECB’s targeted funding?," Working Paper Series 2439, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20202439
    Note: 1503965
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    File URL: https://www.ecb.europa.eu//pub/pdf/scpwps/ecb.wp2439~a6e61d4b11.en.pdf
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    Cited by:

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    2. Fegatelli, Paolo, 2022. "A central bank digital currency in a heterogeneous monetary union: Managing the effects on the bank lending channel," Journal of Macroeconomics, Elsevier, vol. 71(C).
    3. Aberg, Pontus & Corsi, Marco & Grossmann-Wirth, Vincent & Hudepohl, Tom & Mudde, Yvo & Rosolin, Tiziana & Schobert, Franziska, 2021. "Demand for central bank reserves and monetary policy implementation frameworks: the case of the Eurosystem," Occasional Paper Series 282, European Central Bank.

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    More about this item

    Keywords

    dynamic tobit panel; funding for lending; monetary policy operations; take-up behaviour; targeted longer-term refinancing operations;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
    • 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

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