Low uptake in TLTRO could push ECB to take more action

The European Central Bank announced the amount Eurozone banks took up for the second TLTRO – targeted loans offered by the ECB in an effort to stimulate the economy. Banks across Europe took 130 billion euros. This compares with 82.6 billion euros borrowed in the first round in September. By tying cheap four-year credit to the size of banks’ loan books, the ECB is betting the funds will spur lending to companies and individuals.

However, there were expectations for a bigger participation rate and the number was disappointing, prompting speculation that the ECB will now embark on more quantitative easing.

Eurozone financial institutions didn’t borrow nearly enough money to expand the ECB’s balance sheet, leaving the door wide open for more policy easing, analysts said. Altogether, 306 banks took up 129.84 billion euros in the auction, missing consensus of around €150 billion.

The weaker uptake I the TLTRO has made the job a lot more easier for ECB Chief Mario Draghi, who has talked several times about adding corporate bonds and sovereign bonds to the ECB asset purchase program.

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