In its endeavor to deliver credit and stimulate the real economy without damaging (or doing so as little as possible) the banking business of the eurozone, the ECB compensates for the punishment on parked money – the negative interest rate of -0.5 % that applies to the excess liquidity of the eurozone entity- with advantageous loans, the TLTRO, to which only the financial entities themselves have access.

A study by the IÉSEG calculates that the banks that benefit the most from “this compensation system” are Italian and Spanish, with a positive net impact in 2021 of 3,212 million euros and 1,892 million , respectively, for all banks in each country.

According to this estimate, signed by Eric Dor, director of economic studies at the French business school, Luxembourg and German banks would be the most affected, “although only slightly”, with net losses due to these monetary policy measures applied by the ECB. of 796 million euros and 566 million, respectively. For the euro area as a whole, the study concludes that the gain would be up to almost 5,200 million.

The dimension of this impact is contextualized with the estimates of net profit for 2021 of financial entities. Regarding the Spanish sector, Santander is expected to close the year with earnings of about 6,900 million euros, compared to 5,081 million in 2020, while BBVA will exceed 3,600 million this year and CaixaBank will also approach that figure.

Eric Dor, from the IÉSEG, influences the support of the TLTROs to achieve these accounts, but admits the damage that, apart from the punishment for excess liquidity, inflicts on the banking intermediation business that the ECB maintains interest rates official benchmarks, at historical lows, at 0% . And it refers to multiple other factors that have favored the improvement of the results: greater volume of activity, cost savings or increased commissions in other financial services.

Meanwhile, the banking system, as a large holder of public debt, has been benefiting in recent years from the historical volume of purchases of sovereign bonds by the ECB itself in the secondary market, accelerated to emergency levels in response to the crisis of the Covid, to avoid stifling the economic recovery.

‘Punishment’ for parked money
In fact, the money parked in the eurozone ( excess liquidity in financial jargon ) has passed 1.75 trillion in March 2020 – just before the ECB began to deploy the first extraordinary measures to counter the impact of the Great Confinement in the economy – to more than 4.3 trillion euros (see graph), and this reflects that in the current context of interest rates at minimum for a long time, banks have little incentive to lend money or carry out other operations of their own. your activity.

Technically, excess liquidity is the money available in the eurozone banking system that commercial financial institutions do not need to attend to their operations – loans, mortgages or filling ATMs with banknotes – and more than half of the current total comes precisely from TLTRO-III program that the ECB launched in 2019 – and which has accelerated to respond to the historical impact of the coronavirus pandemic – to flood the money system and avoid problems in the short and medium term.

For their part, TLTROs are loans granted by the institution chaired by Christine Lagarde to banks in the euro area under very advantageous conditions and with long maturities, precisely with the objective of lending to companies and families.