Decision (EU) 2016/810 of the European Central Bank of 28 April 2016 on a second series of targeted longer-term refinancing operations (ECB/2016/10) (c. 10)

ANNEX I CONDUCT OF THE SECOND SERIES OF TARGETED LONGER-TERM REFINANCING OPERATIONS

1. Calculation of borrowing allowance and bid limit

Participants in one of the second series of targeted longer-term refinancing operations (TLTRO-II), acting either individually or as the lead institution of a TLTRO-II group, are subject to a borrowing allowance. The borrowing allowance calculated will be rounded up to the next multiple of EUR 10 000.

The borrowing allowance applicable to an individual participant in the TLTROs-II is calculated on the basis of the amount of eligible loans outstanding as at 31 January 2016. The borrowing allowance applicable to the lead institution of a TLTRO-II group is calculated on the basis of the amount of eligible loans outstanding as at 31 January 2016 in relation to all members of that TLTRO-II group.

The borrowing allowance equals 30 % of the outstanding amount of eligible loans relating to the participant(1) as at 31 January 2016 minus the amounts borrowed by the participant in the targeted longer-term refinancing operations (TLTROs) conducted in September and December 2014 pursuant to Decision ECB/2014/34 and still outstanding at the settlement date of a TLTRO-II, i.e.:

BA_k = 0,3 × OL_Jan2016 – OB_k for k = 1,…,4

Here BA_k is the borrowing allowance in TLTRO-II k (with k = 1,…,4), OL_Jan2016 is the amount of eligible loans held by the participant which are outstanding as at 31 January 2016 and OB_k is the amount borrowed by the participant in TLTRO1 and TLTRO2 of the first TLTRO series and still outstanding on the settlement date of a TLTRO-II k.

The bid limit applicable to each participant in each TLTRO-II is the borrowing allowance minus the participant's borrowing in the previous TLTROs-II.

Let C_k ≥ 0 be the borrowing of a participant in TLTRO-II k. The bid limit BL_k for this participant in operation k is:

• BL ₁ = BA ₁ and

• , for k = 2, 3, 4.

2. Calculation of benchmarks

Let NL_m be the eligible net lending of a participant in calendar month m, calculated as the participant's gross flow of new eligible loans in that month less repayments of eligible loans, as defined in Annex II.

Denote by NLB the benchmark net lending for this participant. This is defined as follows:

NLB = min(NL_{Feb 2015} + NL_{March 2015} + … + NL_{Jan 2016},0)

This implies that if the participant has positive or zero eligible net lending in the first reference period, then NLB = 0. If, however, the participant has negative eligible net lending in the first reference period, then NLB = NL_{Feb 2015} + NL_{March 2015} + … + NL_{Jan 2016}.

Denote by OAB a participant's benchmark outstanding amount. This is defined as follows:

OAB = max(OL_{Jan 2016} + NLB,0)

3. Calculation of interest rate

Let NS_{Jan 2018} denote the amount obtained by summing the eligible net lending over the period 1 February 2016 to 31 January 2018 and the amount of eligible loans outstanding as at 31 January 2016; this is calculated as NS_{Jan 2018} = OL_{Jan 2016} + NL_{Feb 2016} + NL_{March 2016} + … + NL_{Jan 2018}

Denote now EX by the percentage deviation of NS_{Jan 2018} from the benchmark outstanding amount, that is,

Where OAB is equal to zero, EX is deemed to equal 2,5.

Let r_k be an interest rate to be applied for TLTRO-II k. Let MRO_k and DF_k be the main refinancing operation (MRO) rate and the deposit facility rate, expressed as annual percentage rates, prevailing at the time of allotment of TLTRO-II k, respectively. The interest rate is determined as follows:

(a)

If a participant does not exceed its benchmark outstanding amount of eligible loans as at 31 January 2018, the interest rate to be applied to all amounts borrowed by the participant under TLTROs-II equals the MRO rate applicable at the time of the allotment of each TLTRO-II, that is:

if EX ≤ 0, then r_k = MRO_k .

(b)

If a participant exceeds its benchmark outstanding amount of eligible loans by at least 2,5 % as at 31 January 2018, the interest rate to be applied to all amounts borrowed by the participant under TLTROs-II equals the deposit facility rate applicable at the time of the allotment of each TLTRO-II, that is,

if EX ≥ 2,5, then r_k = DF_k .

(c)

If a participant exceeds its benchmark outstanding amount of eligible loans but by less than by 2,5 % as at 31 January 2018, the interest rate to be applied to all amounts borrowed by the participant under TLTROs-II is graduated linearly depending on the percentage by which the participant exceeds its benchmark outstanding amounts of eligible loans, that is,

if 0 < EX < 2,5, then .

The interest rate will be expressed as an annual percentage rate, rounded down to the next fourth decimal position.

(1)

References to a ‘participant’ should be understood as applying to individual participants or TLTRO-II groups.