TLTRO III phase-out and bank lending conditions

Francesca Barbiero, Alessandro Ferrari and Franziska Maruhn

Economic Bulletin Boxes, 2025, vol. 8

Abstract: The recalibration of the third series of targeted longer-term refinancing operations (TLTRO III) in October 2022 led to an accelerated repayment schedule, bringing forward the fastest and largest ever decline in Eurosystem borrowing. This strengthened the transmission of policy rates to bank lending conditions. In just over two years, euro area banks repaid more than €2 trillion from TLTRO III. Banks adjusted their balance sheets to allow for the TLTRO repayments, using excess liquidity or raising additional funds via bonds and deposits. This reduction in liquidity and increased reliance on more expensive funding sources led banks to tighten their own lending conditions, thereby reinforcing the transmission of higher policy rates to bank lending. JEL Classification: E51, E52, E58, G21, G28.

Keywords: Bank funding; Bank lending; Liquidity; Monetary policy (search for similar items in EconPapers)
Date: 2025-01
Note: 2609469
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