March 23, 2017 / 10:39 AM / 5 months ago

Euro zone banks take more ultra-cheap ECB loans than expected

FRANKFURT, March 23 (Reuters) - Euro zone banks took up more ultra cheap long-term cash from the European Central Bank than expected on Thursday, tapping into the last auction of an unconventional tool designed to revive the bloc's economy.

Some 474 banks took up 233.5 billion euros of four-year loans in the last targeted longer-term refinancing operation (TLTRO), well above the 125 billion euros expected in a Reuters poll, suggesting that banks are keen to stock up on cheap cash in anticipation of a continued rise in lending.

Unveiled a year ago when lending growth hovered near zero, TLTRO provides banks with interest-free funding and even a possibility for a rebate if they lend the cash to the real economy.

But corporate lending growth is at its highest since 2009 and economic growth is relatively robust, so the ECB decided last month not to extend the TLTRO scheme, a move seen by some as small step towards policy normalization.

Indeed, the ECB will cut month asset buys, also a tool to lower funding costs to revive growth, to 60 billion euros per month from 80 billion euros from April.

Even with the end of the four-year TLTRO, banks will continue to have access to weekly loans from the ECB at a zero percent interest rate. (Reporting by Andreas Framke; Editing by Francesco Canepa)

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