Wait, How Much In LTRO’s?

Long-term Refinancing Operations (LTRO) became a standard non-standard monetary policy tool in the European Central Bank’s (ECB) toolkit late in 2011. A second confounding (global) banking crisis had struck yet again catching global policymakers with their pants down, this one seemingly centered directly upon Europe.

On December 8, 2011, amidst constant rumors (probably real) that two of the major European banks had reached the brink of disaster, European officials announced the creation of these LTRO’s. But, to get them going along, central bankers realized they had to make perhaps the more important if related changes to standard ECB operations:

To increase collateral availability by (i) reducing the rating threshold for certain asset-backed securities (ABS) and (ii) allowing national central banks (NCBs), as a temporary solution, to accept as collateral additional performing credit claims (i.e. bank loans) that satisfy specific eligibility criteria.

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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