Bank borrowing in new ECB loans programme disappoints

The European Central Bank pumped more liquidity into the financial system on Thursday in a bid to boost the eurozone economy but analysts said the uptake by banks was disappointing.
The Frankfurt-based central bank said that 306 banks had borrowed 129.8 billion euros ($162 billion) in the second round of its lending programme of cheap, long-term loans aimed at boosting the economy.
Most analysts had forecast an uptake of around 150 billion euros under the Targeted Long-Term Refinancing Operation (TLTRO), which banks must repay by September 2018.
By pumping more liquidity into the financial system, the Frankfurt-based central bank aims to boost the eurozone economy via private-sector loans and, in turn, halt a stubborn drop in inflation.
ECB board member Benoit Coeure insisted that the latest uptake was "within the ECB's and market estimates and expectations" and noted a higher number of participants this time.
But analyst Nick Kounis, of ABN Amro, termed the impact of the latest lending programme that of a "peashooter rather than a bazooka".
Under the first round of lending in September, the ECB lent 82.6 billion euros to 255 banks, below the forecasts of analysts who had pencilled in an uptake of at least 100 billion euros.
Banks among the 18 countries that share the euro have the possibility to borrow from a pot of around 400 billion euros in the two rounds of lending in 2014.
A further six rounds of TLTRO lending are scheduled until 2016.
The programme is different from the steps the ECB took at the end of 2011 and the beginning of 2012 to boost liquidity.
At that time, banks were deemed to be not lending enough to the small- and medium-sized companies that form the backbone of the eurozone economy.
This time, the ECB is instead targeting loans to encourage banks to lend the money on.
Banks unable to prove they have increased lending to firms and households will have to repay the loans early after two years.
The loans under the TLTRO are offered at a fixed rate of 0.15 percent, slightly above the ECB's key interest rate which is currently at 0.05 percent.