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By Francesco Canepa and Frank Siebelt
FRANKFURT, March 23 (Reuters) - Euro zone banks took up more free long-term loans than expected at the European Central Bank's final TLTRO auction on Thursday as expectations grow that the era of free cash may be coming to an end.
The targeted longer-term refinancing operation (TLTRO) saw 474 banks borrow 233.5 billion euros over four years, almost twice as much as predicted in a Reuters poll. It was also way more than in the previous three auctions, once the repayment of existing loans is taken out.
Dealers and economists said the take-up suggested banks were keen to fill their coffers with free money as the euro zone economy recovers and expectations the ECB may start ending its ultra-easy policy push up borrowing costs on the market.
"Against the backdrop of an emerging, more restrictive ECB policy, it makes sense for the banks to secure liquidity again," said Dirk Gojny, an economist at Germany's National-Bank.
Italy's Intesa Sanpaolo and UniCredit, the only two banks to have published their take-up so far, borrowed 12 billion euros and 24 billion euros respectively.
Unveiled a year ago when lending growth hovered near zero, the ECB's second series of TLTROs provides banks with interest-free funding and even the possibility of a rebate if they lend the cash to the real economy of firms and households.
But with corporate lending growth at its highest since 2009 and economic growth also relatively robust, the ECB decided last month not to extend the TLTRO scheme, a move seen by some as small step towards policy normalisation.
The ECB is due to cut its asset purchases, also a tool to lower funding costs to revive growth, to 60 billion euros per month from 80 billion euros from April.
In addition, some banks saw the ECB's offer of free cash as an insurance against any sudden liquidity squeeze in a year that is punctuated by elections in France and Germany.
The premium for lending to the French government has risen in recent months as far-right, anti-euro candidate Marine Le Pen looks set to get to May's presidential election run-off.
"There is a general reassessment of risks," a euro zone treasurer said. "It's a combination of factors: higher yields, wider spreads and the elections."
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. (Additional reporting by Balazs Koranyi; Editing by Catherine Evans)