by Sprout Money
The European Central Bank (ECB) has made a first tranche of 82.6B EUR available in Long-Term Refinancing Operations (LTRO), which is much less than expected. Most analysts seem to think that any number lower than 100 billion euro will not be sufficient to convince the market that the ECB is doing everything it can to resuscitate the economy. An analyst from the French bank Société Générale said it looks like the ECB is doing ‘too little, too late’. The central bank planned to pump 400 billion Euro into the economy through this liquidity injection scheme, but the banks aren’t too keen on participating. This is very likely caused by the fact they don’t want to look too weak, just weeks before the stress test results will be announced
However, it is remarkable to see that the 82.6B EUR was paid to not less than 255 banks, but almost 30% of the total amount was distributed to just eleven Italian banks. UniCredit seems to have been the biggest fish with a request for 7.75B EUR in LTRO-money, followed by Intesa SanPaolo with 4B EUR and Banca Monte Paschi with 3B EUR. Unlike other banks which were afraid to be singled out, the Italian banks don’t seem to have any issues with this perception, and the percentage of the LTRO’s flowing to Italy is very high, which could indicate the Italian banks are expecting some tough times and want to cash up before things get worse. Even smaller banks like Banca Popolare di Sondrio and Credito Valltellinese borrowed substantial amounts of money, with the latter receiving 1B EUR from the ECB. This is a lot of money, given the fact the bank’s market capitalization is just 1B EUR as well. We are looking forward to see the results of the stress test which should be announced in October of this year.