TLTRO Spillovers Outside the Euro Area

IMF Working Papers, January 31, 2025

Source details

Examines spillovers from ECB’s TLTROs on European countries outside the euro area.
Uses individual banks’ balance sheet data to identify effects on foreign-owned subsidiaries.
Focus on funding rates, lending rates, profitability, and solvency risk of foreign subsidiaries.

TLTROs lowered funding and lending rates for foreign-owned subsidiaries, especially in emerging market economies.
Increase in profitability among foreign subsidiaries following exposure to TLTROs.
No effects detected on solvency risk of foreign subsidiaries.
Quantified effect: every €1 billion in exposure to TLTROs via parent banks is associated with a 0.2 bps reduction in deposit rates and a 0.4 bps reduction in lending rates of foreign subsidiaries.

Exposure measure and impacts:
- €1 billion in exposure to TLTROs → 0.2 bps reduction in deposit rates of foreign subsidiaries.
- €1 billion in exposure to TLTROs → 0.4 bps reduction in lending rates of foreign subsidiaries.
Effects pronounced in emerging market economies among the sample of European countries outside the euro area.

Results underscore the need to factor euro area monetary policies into policy settings outside the euro area.
Policymakers in non-euro European countries should consider spillovers from ECB operations when designing domestic financial and macroeconomic policies.

Data: individual banks’ balance sheet data (used to identify spillovers to foreign-owned subsidiaries).
Geography: European countries outside the euro area, with emphasis on emerging market economies within that group.
Publication: IMF Working Papers, Working Paper No. 2025/034, Pages: 25.

Source: TLTRO Spillovers Outside the Euro Area, IMF Working Papers (2025/034).