Refinancing operation, longer-term, LTRO in the jargon of financial journalists also Refi (Ionger-term refinancing operation, LTRO)

Regular open market operations conducted by the ECB in the form of reverse transactions. – Longer-term refinancing operations are executed through standard monthly tenders, usually with a maturity of three months, in the form of variable rate tenders with pre-announced allotment volumes. In 2006, the Deutsche Bundesbank’s share of refinancing operations with banks averaged approximately fifty percent of all operations in the euro area, i.e., the Deutsche Bundesbank transacted as high a volume as all the national central banks of the Eurosystem combined. – In addition, the ECB offers special facilities in this way in individual cases, such as in the early fall of 2007 in the face of a collateral crisis with a resulting shortage of liquidity. – In Germany, the interest rate for normal operations is the prime rate in the legal sense pursuant to § 1 of the Discount Rate Transition Act of June 9, 1998. – Special refinancing operations of the central bank. In June 2014, for example, the ECB offered long-term loans over a time window of four years, called “targeted longer-term refinancing operations, GLRGs” (TLTROs), at the extremely low key interest rate at the time, practically zero interest. The apparent intention of this measure was to divert capital flows to Southern Europe in order to stimulate the economy there. The ECB’s official justification spoke of a “measure to improve the functioning of the monetary policy transmission mechanism. – However, it is certain that the injection of more and more money alone will by no means lead to the investment in fixed assets that is urgently needed in the countries on the southern front. Rather, the prerequisite for this is favorable expectations on the part of companies. However, it is up to the national economic policies of these countries to bring this about. In principle, more cannot be consumed than produced over a longer period of time. The high national debt that has thus arisen and is still growing in some cases must be reduced there and competitiveness strengthened through appropriate measures. – See Financial crisis, Collateral crisis, Liquidity pool, Emergency liquidity assistance, Repo business, Special refinancing facility, Stability and growth pact, Subprime crisis – Cf. monthly report of the Deutsche Bundesbank of March 2003, p. 17 ff, ECB Annual Report 2007, pp. 106 ff. (LTROs during the subprime crisis), Deutsche Bundesbank Monthly Report of April 2008, p. 26 (overview of operations 1999 to 2008), ECB Monthly Report of August 2009, pp. 37 ff. (effects of the first longer-term refinancing operation with a one-year maturity), ECB Monthly Report of March 2012, p. 43 ff. (effects of the refinancing operations with a three-year maturity), ECB Monthly Report of July 2013, p, 31 ff. (early repayments; many overviews).

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