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The money is repayable in December 2014 and February 2015. But under the rules of the operation, banks are allowed to begin repayment after the first 12 months – in December this year. The early repayment plans echo moves by some US banks in 2009 to repay their government bailout money as quickly as possible.
Despite the accolades for the LTRO, some sceptics have expressed concern that the mechanism is bound to deflate the supply of commercial issuance in the short term, and threatens much of the European banking system with a “cliff” of simultaneous refinancing needs in three years’ time.
Some banks are already seeking longer-term commercial funding. BNP, for example, is 60 per cent of the way through its annual €20 billion funding programme, mostly through private placements, and with an average maturity of six years.
Not all banks are planning to return the LTRO money early. Deutsche Bank and Lloyds, among others, have indicated privately that they plan to hold on to the cheap ECB money for the full three-year term.
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