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Targeted but (not) toxic? TLTRO and financial stability (Marcel Barmeier)

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  • Marcel Barmeier

    (Oesterreichische Nationalbank)

Abstract

As TLTRO programs provide a direct incentive to increase lending, investigating the level of prudence applied by banks in making lending decisions is of high relevance. Relying on loan-level data, I evaluate the riskiness of lending by applying estimations in a difference-in-differences setting around the cut-off of the TLTRO lending period. Investigating various risk-taking strategies, I show that participation in TLTRO operations is not associated with an increase in PDs, defaults or loans overdue. Even banks that only narrowly fulfilled the lending requirements to benefit from the lowest interest rate applied to TLTRO funding did not engage in higher risk-taking.

Suggested Citation

  • Marcel Barmeier, 2025. "Targeted but (not) toxic? TLTRO and financial stability (Marcel Barmeier)," Working Papers 264, Oesterreichische Nationalbank (Austrian Central Bank).
    • Handle: RePEc:onb:oenbwp:264
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    More about this item

    Keywords

    Monetary policy transmission; funding-for-lending; risk-taking channel; financial stability; TLTRO;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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