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European Central Bank officials settled on a compromise for their new longer-term loans after some pushed for tougher terms, according to people familiar with the decision.
The Governing Council chose the middle ground between several options, the people said, asking not to be named because the discussions were private. Some policy makers argued in favor of offering the loans at the same conditions as during a previous round, others preferred stricter rules, the people said.
An ECB spokesman declined to comment.
The ECB announced on Thursday that funds under the so-called TLTRO3 program would be offered at a premium of 10 basis points above the average main refinancing rate -- currently at zero -- over the life of the loan. That rate can fall to 10 basis points above the deposit rate -- currently at minus 0.4% -- if banks increase their lending activity.
Click here for more technical details on the TLTRO3 program
The terms are less generous than those applied under TLTRO2. In the run-up to the decision, policy makers had discussed the need to gradually wean off banks from ECB support while continuing to provide adequate stimulus at a time of heightened economic risks.
President Mario Draghi acknowledged the increased uncertainty since the ECB first committed to new long-term loans in March. He pointed to the “rising threat” of protectionism, geopolitical factors and vulnerabilities in emerging markets.
The first offer in a batch of seven quarterly operations will be made in September. All will have a maturity of two years and can't be repaid early. On Thursday, the ECB also extended its pledge to keep rates at a record low, and several officials raised the prospect of interest-rate cuts or restarting quantitative easing.
To contact the reporters on this story: Carolynn Look in Frankfurt at clook4@bloomberg.net;Piotr Skolimowski in Frankfurt at pskolimowski@bloomberg.net
To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Zoe Schneeweiss
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