From Breakingviews - ECB’s inflation battle has a 550 bln euro problem
June 28 is a pivotal date on the European banking calendar. On that day, lenders must repay 549 billion euros they borrowed from the ECB’s targeted longer-term refinancing operations three years ago, during the pandemic.
Yet allowing the TLTROs to simply mature would force banks to fund elsewhere, driving up funding costs. And they are already facing a squeeze, as investors fret more over the impact of higher rates and real estate losses. The extra return, or spread, that investors require to hold bank debt over government securities has risen by some 35 basis points since early March, according to an ICE Bank of America index.that euro zone banks are well capitalised and have plentiful liquidity.
Such pricing would ensure that only lenders that really need the funds apply. And it would limit the risk that a splurge of liquidity drives up inflation. Doing nothing may be appealing for the ECB because, as executive board member Isabel Schnabel
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