Final week, the ECB revealed details about the substantial demand for liquidity requested by eurozone banks in the course of the fourth spherical of focused longer-term financing, TLTRO III. In line with Gouveia, this is because of the truth that “the terms offered have improved significantly, but also demand for business loans has skyrocketed, and in contrast with previous crises, banks are now better equipped to help financing reach those healthy companies that need it.”
Banks made extra requests to the ECB than had been anticipated, and the quantity they requested for — €1.three trillion — exceeded earlier rounds. BBVA Analysis explains that “of this, only €550 billion represents completely new financing; of the remaining €760 billion, there is financing restructuring from TLTRO II, and another (some €390 billion) equates to conversion from weekly auctions that were kicked off between March and June in order to avoid any kind of liquidity tension leading up to this auction.”
In complete, “what we are talking about from the start of the COVID-19 crisis is approximately €900 billion in new funding” says Gouveia. The BBVA analysis economist explains what European banks are doing with this financing. The reply, in her opinion, is straightforward: giving enterprise loans. Consequently, in March and April, “new business lending transactions in the eurozone reached €295 billion and €310 billion respectively, representing 25 percent and 30 percent growth compared to the same months last year,” With regard to stock, the rise has been spectacular: particularly, “€117 billion in March and €73 billion in April, thus representing a 20-year month-to-month variation report,” Gouveia writes in her piece.
As well as, she stresses that “the breakdown by nation proves to be a standard pattern defying stereotypical north-south variations. In March and April, enterprise lending grew €64 billion in France, €35 billion in Germany, €34 billion in Spain, and €23 billion in Italy. Everyone seems to be upping their credit score, and so, in flip, additionally their appeals to the ECB.”
Briefly, “regardless of the extreme disaster brought on by COVID-19, it’s encouraging to see that the measures that had been instituted are yielding outcomes: liquidity tensions have been prevented, the ECB applications are working, banks are asking the central bank for large quantities in funding, governments are giving banks ensures for the extra danger they’re incurring, and likewise, the latter are doing their jobs, financing working companies which have suffered disproportionately in the course of the disaster,” she concludes.