How did Italy repay the TLTRO?
June's repayment drew mainly on deposits, but also one week repos and some external liquidity
Among the challenges facing Eurozone banks, the repayment of long-term repos (TLTROs) taken up during the pandemic has been one of the most interesting this year. And end-June saw EUR503bn repayment of LTROs by Eurozone banks—the voluntary (early) repayment of EUR28bn in other TLTROs and on top of the remaining EUR477bn of TLTRO3s taken in June 2020. This will likely be the largest weekly decline in outstanding repos for some time.
Italy is most interesting case, as noted previously, as they had the largest outstanding LTROs relative to domestic liquidity held by the banks.
How would Italian banks manage this repayment? Well, the Bank of Italy balance sheet for end-June, published earlier this month, provides some colour.
Where did the liquidity come from?
BoI outstanding LTROs declined by EUR145bn in June, from EUR317.9bn to EUR172.5bn—the lowest level since mid-2016.