MNI SOURCES: ECB Set For TLTRO Discussions Ahead June Maturity

The European Central Bank is likely to discuss bridging finance for the upcoming maturity of EUR500 billion in cheap TLTRO loans to banks, either at its upcoming meeting next week or in June, Eurosystem sources told MNI.

“Given conditions, it’s not unrealistic to suggest another TLTRO bridge and I'm sure it will be discussed,” one source said.

While May would be a more beneficial time for the discussion, allowing banks to position themselves ahead of time, the source accepted that even if the ECB executed such a plan, “we may not need to have it in place until June”.

Following an EUR72 billion early TLTRO III repayment in March, June will see around EUR490 billion set for maturity. If completed, this would help get excess liquidity in the eurosystem down from current levels around EUR4 trillion to nearer EUR3.5 trillion, reducing the overall balance sheet to nearer EUR7.3 trillion from EUR7.7 trillion currently.

“Given the size of the June maturity, it makes perfect sense any impacts it could have will be discussed at some point over the next two meetings,” another source said, although he was unsure how deep current discussions had gone.

“Whether or not there is bridge financing of some shape may well depend how the bank turmoil plays out in the next month or so,” he added.

An ECB spokesperson declined to comment.