Great Graphic: A Look at LTROs

This Great Graphic was posted by Frederik Ducrozet on twitter.  It shows that three countries account for vast majority of the remaining LTRO borrowings:  Italy, Span and France.  Portuguese and Irish banks have some exposure as well. 

This is important and underscores where bank weakness is still pronounced.  Reports suggesting that the EBA will penalize banks who rely on the LTRO in next year's stress test are noteworthy in this context.

This second set of charts comes from Vincent Flasseur at Reuters.  The top one traces the usage of the LTRO, while the lower chart shows the weekly pay downs.  One can see that the pace has picked up over since the end of August.  The pending stress tests will likely accelerate this. 

The risk is that as the LTRO repayments are made, it further reduces the excess liquidity in the euro system and may exert upward pressure on money market rates.  That users of ECB financing will be penalized, would seem to undermine the likelihood of another LTRO, which even ECB President Draghi had seemed open to the possibility. 

For banks deemed solvent, but without the quality of collateral acceptable by the ECB, there is the Emergency Lending Assistance (ELA), provided by the national central bank (at their risk).  Currently, it appears that only Greek and Cypriot banks are drawing on the ELA.  In terms of the main refinancing operations (MRO), Greek and Spanish banks account for the bulk of the utilization.