Banks and the ECB: what changes for mortgages, deposits, and investments

A new announcement by  Mario Draghi: banks will be able to benefit from the Tltro 2 program. All this will bring greater liquidity to the market and, consequently, more loans for businesses and households.

The ECB provisions for banks

After the European Central Bank’s rate cut, the market is finally moving positively. According to the Promethea study center, the choice of Mario Draghi should bring the banks up to 317 billion euros.

The same study center also reiterated how:

“What will surely bring relief and facilitate the transmission of monetary policy to the real economy is the fact that the ECB  is willing to pay the banks if they borrow money to pass on to the economic system … banks thus find themselves having up to € 317 billion more in long-term loans, which will further reduce the need to issue bonds to replace those maturing in the coming months, thus protecting against market volatility … There has been much discussion on the negative consequences of sub-zero rates on the balance sheet of banks. These have fallen again and no diversification mechanism on the amounts deposited with the ECB has been introduced. “

All of this was done, to use Draghi’s words, to signal that rates cannot go down indefinitely. The ECB knows that at some point the negative policy number rates become harmful to some banks.

What changes for mortgages and deposits?

By choosing to bring the main refinancing rate to zero, there will be a 5 cent reduction in interest for borrowers who have chosen this specific parameter. Similarly – – “the cut in the deposit rate should further lower the 3-month Euribor and bring it towards -0.25%, a level that according to analysts from Barclays Research is consistent with a deposit facility at -0. , 40 percent. In any case, it is a question of small change on installments which in themselves are at an all-time low “.

What changes for investments?

With the possible decrease in the yield differential with the security, it could reach 1.30%. Furthermore, we can go back to talking about corporate bonds, which can be purchased from the ECB. It should be emphasized that, in this case, the yields will be destined to decline.

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