MNI POLICY: Weidmann: ECB Must Look At Terms Of Any New TLTROs

By Luke Heighton

     FRANKFURT(MNI) - The European Central Bank will have to consider the

conditions of any fresh round of cheap bank funding if it provides new targeted

longer-term refinancing operations, the head of the German Bundesbank said

Wednesday.

     Speaking at a press conference in Frankfurt following the release of the

Bundesbank's Annual Report, Jens Weidmann said previous TLTROs were "an

instrument that has been used in a crisis", and that it made "no sense" to

consider an identical arrangement given the current positive outlook for lending

and the "negligible" risk of deflation in the euro area.

     Asked whether he had "concerns" about the reintroduction of TLTRO's,

Weidmann replied: "I'd just discuss the way in which it was set up. I believe

there would have to be a monetary policy reason for them."

     The ECB's Governing Council will "have to discuss how this is designed" in

terms of maturities, volumes, and whether some aspects of TLTROs might be "in

contradiction" with the ECB's current forward guidance, he said.

     Policymakers should "encourage the banks to support themselves," and

monetary policy should not be shaped according to what might benefit specific

banks, he added.

     The Governing Council has yet to discuss the possible effect of the

expiration of current TLTRO arrangements, and the effect of such on the ECB's

medium-term target of achieving inflation of close to 2%, he said.

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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