Fitch: European banks may need third LTRO

23 May 2012

It is becoming increasingly likely that European banks will require another long-term refinancing operation (LTRO) in the near future, a leading credit agency has stated.

According to a new report published by Fitch Ratings today (23 May), a combination of factors - such as concerns over eurozone sovereigns and countries' restricted deleveraging ability - means financiers may need further assistance.

Towards the end of last year, the European Central Bank made three-year loans with an interest rate of one per cent available to struggling banks across the continent.

This scheme - which was implemented in two rounds - proved extremely popular, with hundreds of banks taking advantage by borrowing a total of around €1 trillion ($1.2 trillion).

And Fitch has today indicated the ECB may need to repeat this programme should a "significant shock" to the eurozone occur, such as the exit of Greece from the economic bloc.

"If a third LTRO is needed, we believe it will be provided," the body added.

By Claire Archer

Become a bobsguide member to access the following

1. Unrestricted access to bobsguide
2. Send a proposal request
3. Insights delivered daily to your inbox
4. Career development