ECB gifts German banks EUR 1 billion

Thursday 25 March 2021 14:16 CET | News

The European Central Bank (ECB) has announced a pandemic rescue policy for German banks, which will benefit from an interest gift worth billions in 2021 and 2022.

The primary aim of this support is to ensure that the banks do not cut their lending business, maintain the supply of liquidity to the economy and can offset the burden of negative deposit rates. In Germany, the Bundesbank collects the interest, which is currently at –0.5%, on bank deposits at the ECB. With the negative interest rates, the ECB wants to ensure that money market rates fall and also depress the positive lending rates of banks with longer terms.

Banks use this money in their central bank accounts only for business and transactions with other banks or governments. The Governing Council of the ECB decided in April 2020 and December 2020 to lend the banks additional central bank money for three years in exchange for collateral bonds, but without charging interest. The ECB now pays a premium in these transactions called TLTRO (Targeted Longer-Term Refinancing Operations), which is normally 0.5%. However, it can increase to 1% until 23 June 2022 if the banks keep their lending business with customers constant.

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Keywords: mobile payments, banks, transactions , mobile banking
Categories: Banking & Fintech
Countries: Germany
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