IMF Working Papers

TLTRO Spillovers Outside the Euro Area

By Carolina Lopez-Quiles, Adil Mohommad

January 31, 2025

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Format: Chicago

Carolina Lopez-Quiles, and Adil Mohommad. "TLTRO Spillovers Outside the Euro Area", IMF Working Papers 2025, 034 (2025), accessed March 3, 2025, https://doi.org/10.5089/9798229000239.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We examine spillovers from ECB’s TLTROs on European countries outside the euro area. Using individual banks’ balance sheet data, we find that TLTROs lowered funding and lending rates for foreign-owned subsidiaries, especially in emerging market economies. We also find an increase in profitability among foreign subsidiaries and no effects on solvency risk. The effects are sizable--every €1 billion in exposure to TLTROs via parent banks is associated with 0.2 bps reduction in deposit rates and 0.4 bps reduction in lending rates of foreign subsidiaries. This underscores the need to factor euro area monetary policies into policy settings outside the euro area.

Subject: Bank credit, Business cycles, Deposit rates, Economic growth, Financial institutions, Financial sector policy and analysis, Financial services, Foreign banks, Money, Spillovers

Keywords: Bank credit, Business cycles, CESEE, Deposit rates, ECB's Targeted Longer-Term Refinancing Operations, Europe, Foreign banks, Monetary policy, Spillovers, Spillovers from ECB's TLTROs, Subsidiaries' share, TLTRO, TLTRO exposure, TLTRO operation

Publication Details

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