PRAGUE (Reuters) – The European Central Bank’s new bank funding scheme will come later than expected because of the time needed to prepare the facility, Austrian central bank chief Ewald Nowotny said on Friday.
The ECB delayed its first post-crisis rate hike on Thursday and announced the new bank funding facility, trying to combat a sharp slowdown in growth and prevent pervasive uncertainty turning a slowdown into a recession.
But first of its new quarterly targeted longer-term refinancing operations (TLTRO) will be held in September, three months later than markets had expected, raising the risk that some lenders may face a funding gap.
“To make this a successful programme, it has to be well-prepared,” Nowotny, one of the longest serving members of the Governing Council, told reporters.
The ECB’s previous TLTRO will start to mature in June 2020 but once the remaining maturity of existing loans falls under a year, they have to be reclassified on balance sheets.
Nowotny, known to be critical of ECB decisions in the past, also said that the central bank’s reaction to the slowdown was correct.
The bank needed to signal that the euro zone is not in a recessionary environment but that monetary expansion was still needed, Nowotny added.
“The external situation has a lot of risks … But I think what the ECB did was the correct reaction to that,” he said.
(Reporting by Jan Lopatka and Jason Hovet; Writing by Balazs Koranyi; Editing by Catherine Evans)