They don’t have to do anything, just open their wallet and cash out. It is a celebration in sight for the banks in the euro zone. At the beginning of the pandemic the European Central Bank made available to credit institutions 2 thousand and 200 billion euros of funds with negative interest, essentially the banks were being paid to accept them. Now that the ECB is preparing to raise rates for banks that have made use of these loans, it would be sufficient to deposit this money in accounts with the central institution to collect billionaire profits. According to analysts, the operation could bring in up to 24 billion euros. The London newspaper writes it Financial Times reporting how Frankfurt is trying to devise a strategy to avoid, or at least reduce, this shower of free profits. The ECB will meet its next governing council July 21, the day it already announced its intention to launch the first interest rate hike in 11 years. It will probably be a first touch-up of the 0.25% but it is not excluded that, in the light of the latest increases in inflation, the intervention could be half a point. Further interventions announced in September. From that moment the banks will begin to collect simply by depositing the money they had on loan.
The sources of the ECB interviewed by the London newspaper underline how it would be for the ECB politically unacceptable to insure banks these profits just as the costs of loans and mortgages for companies and families are raised. Officially, the central bank declined to comment on the hypotheses under study. The analysts of Morgan Stanley they estimate that, without corrective measures, between 4 and 24 billion euros of additional earnings could enter the coffers of banks between now and the end of 2024, the date on which the low-cost financing program ends. Beyond 740 banks have applied to access these lines of credit e so far they have been distributed one thousand and 300 billion euros. LHowever, the list of banks that received the funds is not public. Last month, loans were returned to the ECB for 74 billion, much less than expectedtestifying to the attractiveness of the scheme, writes the Financial Times. Interviewed by the newspaper the analyst of the rating agency Moody’s Fabio Iannò he explained: “We expect European banks to keep these lines of credit (Tltro) for as long as possible, it is free money” adding that most of the funds are not put back into circulation for loans to customers and the economy real but simply deposited in the accounts with the ECB. On an aggregate level, the largest share of the funds ended at French banks (500 billion euros) followed by the institutes of Italy and Germany. The only one Deutsche Bank has underwritten Tltro loans for almost 45 billion euros. Last year these funds brought the German bank 494 million euros or 15% of its pre-tax profit.
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