LTRO 'has made banks more vulnerable'

12 April 2012

Many banks have become more susceptible to financial problems since the European Central Bank (ECB) stopped its three-year lending programme, an expert believes.

According to Andrew Roberts, credit chief at the Royal Bank of Scotland (RBS), the decision to make cost-effective loans available to financiers has resulted in parts of the continent's banking system being left more vulnerable than before.

Last October, the ECB announced it would be issuing three-year lending agreements to banks with an interest rate of just one per cent and hundreds of firms took advantage of this offer by borrowing a combined total of €1 trillion ($1.3 trillion).

However, Mr Roberts has told the Daily Telegraph that in the long-term, this scheme may have caused more problems than it has solved.

"The banks are deeply underwater. This is turning into a disaster for the eurozone periphery now that the liquidity tap has been turned off," he stated.

By Gary Cooper

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