FRANKFURT (Reuters) - Banks will return 1.79 billion euros ($243.72 billion) in long-term crisis loans to the European Central Bank next week, ECB data showed, a slowdown in repayments as banks await fresh policy measures from the ECB.
The amount that banks will repay on June 4 is below this week’s repayments of 6.977 billion euros, and falls short of the 5.5 billion forecast in a Reuters poll.
The ECB has signaled its readiness to take fresh policy action at its June 5 policy meeting after reviewing the latest round of its staff forecasts for the euro zone economy, which are due to come out the same day.
ECB Executive Board member Yves Mersch said on Wednesday next week’s policy meeting could yield a combination of policies to tackle low inflation and low credit growth, but the timing of the implementation could vary.
Reuters reported earlier this month that the ECB’s policy package would include cuts in all interest rates and targeted measures aimed at boosting lending to small- and mid-sized firms.
Lowering the main refinancing rate would make holding the existing three-year loans - the cost of which is linked to this rate - cheaper and reduce borrowing costs.
But cutting the interest rate on overnight deposits below the current level of zero would effectively mean charging banks for parking their excess cash overnight at the central bank.
Tools on the ECB’s shelf include also an injection of cheap long-term funds with pricing linked to an increase in net lending and targeted measures aimed at boosting lending to smaller firms, for example through the securitized loan market.
On Friday, the ECB said three banks would repay 1.55 billion euros from the first LTRO on June 4, and two banks would pay back 240 million from the second LTRO.
Reporting by Eva Taylor Editing by Jeremy Gaunt