Avoid panic and keep the wheel of credit turning. They were the goals with which the Banco Central Europea (ECB) faced the beginning of the pandemic in 2o2o activating the injection of money to financial entities with unbeatable conditions. It was about avoiding a financial collapse and giving the economy the feeling that there was money in the banks to maintain investments and projects despite the slowdown caused by the confinements resulting from the pandemic. Long-term financing operations (TLTRO) have been placed in this framework in their third call. A mechanism by which banks could request money from the ECB with negative rates of -1%. In such a way that, just by taking the money, they obtained a profit of that type plus what they could later generate with the interest with which they lent the money to their clients. this way Kutxabank and Labor Kutxa they have obtained 7,955 million euros. The entity that emerged from the old savings banks has received 6,275 million, for 1.68 million euros Laboral Kutxa. A resource that will not be maintained.
And it is that this path will be suspended in a scenario of interest rate rises that the consensus of the markets and analysts takes for granted at the end of the year. Own Governor of the Bank of Spain, Pablo Hernández de Cos, pointed out a month ago in Bilbao that the rise in interest rates will be after the summer, gently and under conditions. It is a decision that will be pushed by an inflationary scenario of rising prices that is beginning to affect energy and food, impacting what is known as the underlying CPI.
The rise in interest rates would be, on the one hand, good news for banks since their profit margin in banking operations would increase by obtaining more profitability in credit management. But, on the other hand, it would also close a series of measures that have facilitated the flow of credit, such as this easy obtaining of resources from Europe that has led to the third call for TLTRO. It is a mechanism by which ECB offers money to banks at negative interest (-1%). The European Central Bank grants banks, at the time of delivery of the money, 0.5%. That is, the entities charge to access the money and, 3 years later, if the conditions are met, they give them the other 0.5%. Hence, it is negative interest. These conditions only exist if the financial entity that has participated in the program maintains its volume of credit and this amount is not used to refinance debt or mortgage credit.
Until now Kutxabank would have obtained about 31 million euros and Labor Kutxa 8.4 million, in addition to what was earned by the interests managed with its clients. The other half is the one that would be committed in a scenario of rising interest rates, as well as any other call for this line.
Kutxabank requested the 6,275 million in three calls. 66o million in March 2o2o, 5,o45 million in June of that same year and another 57o million last year. For its part, Laboral Kutxa requested 1.68 million euros in June 2o2o.
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