By the end of February 2015, as it currently stands, banks need to pay back €314.83bn in the ECB’s original long term refinancing operations. That’s from a total amount borrowed of €1018.72bn. That’s just over a third left to repay. €99.75bn has to be repaid by the end of Jan 2015.
ECB LTRO 1 outstanding
ECB LTRO 2 outstanding
That’s still a lot of beans to pay back over the next 4/5 months and that could get the markets alarm bells ringing. While financing operations overlap, and there’s always money going backwards and forwards (I call it money triangles) it does represent a potential sticky point for banks. It could also well be another reason why we’re seeing a fall in stocks prices. All that LTRO money had to go somewhere and banks could now be starting to liquidate positions with the payback deadline approaching.
All through the LTRO’s I’ve not wanted to know who has been repaying but who hasn’t, and that could well come to light when we get the stress test and AQR results later this month. If it’s found that some banks are still struggling that might restrict the amount that could be borrowed from the next TLTRO in December.
The banks that have taken the new funds are making an effort to make them available to borrowers but there’s still a demand issue in Europe, just as much as a supply issue.
So we face three big points in European banking.
- The stress tests
- December TLTRO take up
- New year final LTRO repayments
If the banks sail through all three without any major problems then it could give a big confidence boost to Europe and therefore the Euro. If there’s one thing we’ve learnt with old teflon is that it’s not shy on jumping on proper good news. The market is lacking a real reason for buying it now but this could be a big kicker for the single currency.
