Paying Banks to Lend? Evidence from the Eurosystem's TLTRO and the Euro Area Credit Registry

Abstract

From March 2020, for the first time in its history, the Eurosystem made a direct transfer to the banking system, conditional on how much credit it would supply to the real Economy. We study the effect of this subsidy made via the lending program ``Targeted Longer-Term Refinancing Operations'' using the newly available Euro-Area credit registry. We exploit an exogenous change in the amount banks could borrow and find statistically significant effects of the program on credit supply, although each euro lent by the central bank resulted in only 13 to 46 cents of additional credit to the Economy.

Keywords: TLTRO, ECB, Funding-for-Lending, AnaCredit

JEL Classification: G11, G15, G23, H55, Q54, Q56