巴黎银行-欧洲-投资策略-定向长期再融资操作的正反面-20181107-9页_1007kb

FOCUS | EUROZONE - TLTRO-II Summary

Core Content Overview

This report discusses the implications of the European Central Bank's (ECB) Targeted Long-Term Refinancing Operations (TLTRO-II) as they mature in 2020/2021, with a particular focus on the potential impact of the transition of TLTRO-II funding from above-one-year to below-one-year maturities on the banking system and funding markets.

Key Points

• TLTRO-II Overview:

  • The TLTRO-II program has provided EUR3.25 trillion in liquidity to the eurozone banking system.
  • Over EUR740 billion (20%) of this comes from the TLTRO-II program, with the rest from the QE program.
  • TLTRO-II is designed to support banks with long-term funding at favorable rates, indexed to net lending to non-financial corporates and households.

• Repayment Timeline:

  • The first TLTRO-II tranche (EUR385 billion) will mature in June 2020, but may be repaid in June 2019 as its remaining maturity drops below one year.
  • Early repayments are allowed starting two years after the settlement of each operation.
  • As of June 2018, only EUR14.6 billion (3.3%) has been repaid early, with most of the TLTRO-II balance still outstanding.

• NSFR Impact:

  • The Net Stable Funding Ratio (NSFR), effective since January 2018, is a key factor in the NSFR calculation.
  • Funding with a remaining maturity of more than one year counts as 100% available stable funding (ASF), while below one year counts as 0%.
  • A sharp transition of large amounts of TLTRO-II funding into the below-one-year bucket could create liquidity strains, especially for banks that rely on it for NSFR compliance.

• Potential for a New TLTRO:

  • A new TLTRO could help mitigate liquidity strains and support banks' NSFR requirements.
  • However, introducing a new TLTRO could be seen as a shift in monetary policy stance, potentially conflicting with the ECB's forward guidance.
  • It may also send mixed signals if the ECB ends net asset purchases while introducing a new liquidity facility.

Main Views

• Liquidity Outlook:

  • Total system liquidity is expected to remain ample after June 2019, even if the first TLTRO-II tranche is repaid in full.
  • The ECB is likely considering ways to manage the transition of TLTRO-II funding without causing disruption.

• Timing of Repayments:

  • Early repayments are expected to increase significantly in June 2019 and December 2019.
  • The fourth TLTRO-II tranche (EUR233.47 billion) will be key to watch in March and September 2020.

• ECB's Consideration:

  • The ECB may introduce a new long-term funding facility to counteract the liquidity strains from TLTRO-II maturing.
  • However, such a move is unlikely to be announced at the December 2018 ECB meeting due to the potential for conflicting signals with its balance sheet reduction plans.

Key Dates and Risks

• Key Dates:

  • June 2019: Potential large repayment of the first TLTRO-II tranche.
  • December 2019: Further transition of funding into the below-one-year NSFR bucket.
  • March and September 2020: Key dates for the fourth TLTRO-II tranche.

• Risks of a New TLTRO:

  • Change in Policy Stance: Seen as a shift from previous forward guidance.
  • Conflicting Signals: Could be interpreted as a dovish move while the ECB is ending QE.
  • Low Take-Up Risk: A new program might not be well-received, especially if it is perceived as a targeted support for specific countries like Italy.
  • Policy Reserve: The ECB may prefer to keep new LTROs as a contingency tool rather than deploy them immediately.

Conclusion

• The ECB is likely preparing for the maturation of TLTRO-II, which could cause liquidity strains due to the NSFR transition.
• A new TLTRO is a possible solution, but it comes with significant risks and disadvantages.
• The ECB is expected to keep the option open but may not make an announcement in December 2018.
• The report emphasizes the importance of careful communication and design of any new facility to avoid misinterpretation and maintain market confidence.