Banks borrowed €489 billion in the three-year operation but have repaid €307 billion of 12-month, three-month and seven-day money this week. The net increase in conventional lending, therefore, is €182 billion – smaller than the €278 billion resulting from the first 12-month LTRO in June 2009 but still substantial.
Banks have another chance to borrow for three years in February so there was no need to go “all-in” now.
The boost to bank reserves (i.e. balances in current accounts and the deposit facility) will be less than €182 billion to the extent that looser collateral requirements allowed banks borrowing under “emergency liquidity assistance” programmes to switch into the three-year operation – see previous post. The impact, however, should be at least €100 billion, implying that reserves will rise to well over €600 billion versus a previous record high of €529 billion in June 2010 (€512 billion last week).