Euro zone Banks borrow record 1.31 trillion euros from ECB

Euro zone banks borrowed a record 1.31 trillion euros ($1.47 trillion) from the European Central Bank, taking advantage of negative interest rates to meet growing demand for credit from companies hit by the deepest recession in living memory.

Launched six years ago, the ECB’s targeted-longer term refinancing operations (TLTROs) were redesigned earlier this year to help the economy cope with the coronavirus crisis and banks will get the cash for a rate as low as minus 1%.

At 1.31 trillion euros, take up is above expectations with most analysts predicting a figure just over 1 trillion euros for the three-year loans.

Forecasts were generally in the 900 billion to 1.4 trillion euro range.

Although borrowing was more than twice as big as in any previous ECB facility, the net take is smaller as banks likely rolled over around 750 billion euros worth of earlier ECB funding to take advantage of record low rates.

The negative interest rate means banks that tapped the auction will earn 0.50% for one year with no strings attached and 1% if they simply refrain from shrinking their loan book.