Frankfurt Banks have secured cash injections from the European Central Bank (ECB) in a first new transaction of this kind at extremely low interest rates. In the face of the corona virus crisis, the monetary authorities want to use the money salvos to ensure the banks’ liquidity supply and support the flow of credit to the economy.
The ECB allocated a total of 109 billion euros to the institutes, as the euro guards announced on Tuesday in Frankfurt.
At its interest rate meeting last week, it had decided a total of 13 such salvos, known in technical jargon as “LTRO”. They are part of the package of measures that the ECB wants to use to contain the negative consequences of the pandemic for the economy.
The central bank sets the deposit rate as the interest rate for the liquidity injections. This is currently minus 0.5 percent. Banks therefore receive a premium when they access the funds. The ECB launches the injections every week and all run until June 24.
Banks have the opportunity to pass on outstanding funds to a new three-year targeted credit business (TLTRO III). This should be even more advantageous for the institutes: they will be rewarded with a bonus of up to 0.75 percent.
More: Read why the central banks cannot help the stock exchanges in the current situation.