(Adds details of programme)
FRANKFURT, July 3 Banks that do not lend after
receiving cheap loans from the European Central Bank's new
funding programme will be made to pay the money back, ECB
President Mario Draghi said on Thursday.
"If the bank doesn't give evidence they have produced some
net lending with respect to the benchmark, they will have to pay
back," Draghi told a news conference after the ECB left interest
The ECB is keen to avoid a repeat of what happened with its
previous round of cheap funding, much of which euro zone banks
used to buy up debt of their governments, tightening links
between them that had proved problematic during the crisis.
Giving broad details earlier of the new TLTRO lending
programme, Draghi said banks could participate either
individually or as a group if certain criteria are met.
They will initially be allowed to borrow a sum equal to 7
percent of the total amount at April 30, 2014 of their loans to
the euro area non-financial private sector, excluding loans for
house purchases, at operations on Sept. 18 and Dec. 11.
"Banks can draw additional allowances under the programme
if they generate eligible lending over the first two years of
the programme in excess of a given benchmark," Draghi said.
This will be equivalent to three times the difference
between their actual eligible lending and their benchmark, and
can be borrowed via six TLTRO quarterly operations running from
March 2015 to June 2016.
There will be different benchmarks for banks that are
currently expanding their loan portfolios and banks that have
decreased their lending to the real economy, although these will
be harmonised after a year, Draghi said.
"By devising these two benchmarks, we took into account
that for some banks deleveraging is necessary," said Draghi.
"We certainly don't want to discourage that. It is part of
the adjustment process towards a more sustainable finance
(Written by Catherine Evans Editing by Jeremy Gaunt)