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ECB lends out €82.6 billion to 255 banks under its new lending programme Central Bank Governor Professor Patrick Honohan
The European Central Bank said today that it had loaned €82.6 billion to 255 banks under its new lending programme aimed at boosting the economy via private-sector loans.
“The programme is designed to enhance the functioning of the monetary policy transmission mechanism by supporting bank lending to the real economy,” the Frankfurt-based central bank said.
The amount came in below forecasts by analysts who had pencilled in an uptake of at least €100 billion for the Targeted Long-Term Refinancing Operation (TLTRO).
In June, the ECB unveiled plans to pump more liquidity into the financial system later in the year using the TLTRO.
The measures are different from the steps which the ECB took at the end of 2011 and the beginning of 2012 to boost liquidity.
At that time, banks were deemed to be not lending enough to the small and medium-sized companies that form the backbone of the euro zone economy.
This time, the ECB is instead targeting loans to encourage banks to lend to households and non-financial corporations.
Banks in the single currency area have the possibility this year to borrow from a pot of around €400 billion – up to 7% of their outstanding loans to businesses and households – in two rounds of lending.
The second round is scheduled for December 11.
The loans under the TLTRO, which runs until September 2018, are advantageous as their financing is calculated on the basis of the ECB’s key interest rate which is currently at a new all-time low of of 0.05%.
Six further TLTRO rounds will follow between March 2015 and June 2016 but under different conditions.
ECB outlines new plan on voting powers
Meanwhile, the European Central Bank today detailed plans for changing the way the euro zone governors vote from next year, curbing smaller economies’ potential influence in favour of big countries, like Germany.
The move, triggered by the swelling of the euro zone to 19 countries with Lithuania’s accession next year, will divide national central bank governors into groups of smaller and larger economies to ensure efficient decision making.
The five largest economies with the biggest financial sectors will share four votes. These are Germany, France, Italy, Spain and the Netherlands.
The ECB said today that Spain would sit out first when the rotation starts in January.
The rotational system means financial markets are likely to focus on meetings when some of the most influential governors, such as Bundesbank chief Jens Weidmann, cannot vote.
Weidmann will not vote at the May and October meetings next year. In 2016, he will not vote in March and August.
The remaining 14 smaller economies will share 11 votes, but will get to vote less frequently as more countries join the governing council. Here, Estonia, Ireland and Greece will be the first to relinquish their voting rights, the ECB said.
The system was set by the ECB and European Union leaders as far back as 2003, but only from next year could the numbers could get high enough to trigger the change.
The six members of the ECB’s executive board, which implements monetary policy and runs the everyday business, are exempt from the monthly vote rotation and have permanent votes.
These seats have traditionally been occupied by the euro zone heavyweights: Germany, France, Italy and until 2012 Spain. At the moment Portugal, Luxembourg and Belgium are also seated at the top table, but their presence is not set in stone.
The Governing Council comprises the executive board and the national central bank governors, including Ireland’s Professor Patrick Honohan.
At meetings when they cannot vote, all governors will continue to participate in the Governing Council’s discussions, the ECB said.