September 21, 2018 / 10:11 AM / in 3 months

Euro zone banks repay only a fraction of ultra-cheap ECB cash

FRANKFURT, Sept 21 (Reuters) - Euro zone banks agreed repay 3.6 billion euros ($4.2 billion) of ultra cheap funding to the European Central Bank, returning only a fraction of their borrowings two years ahead of schedule, the ECB said on Friday.

Banks were eligible to repay about 433 billion euros worth of loans from four-year targeted longer-term refinancing operations (TLTRO) but few market player expected big repayments as the ECB is providing some of the cheapest long-term funding.

The facility, part of the ECB’s stimulus package launched to fight off the threat of deflation and to boost growth, is remunerated under certain conditions at the bank’s deposit rate, ensuring a rebate since the rate is now minus 0.4 percent.

Banks borrowed a combined 739 billion euros in four tenders in the ECB’s second TLTRO facility and they have the option to make an early payment every quarter after the first two years.

In the first voluntary repayment, only 11 billion euros of funds were returned to the ECB. ($1 = 0.8491 euros) (Reporting by Balazs Koranyi Editing by Francesco Caneoa)

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