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ECB begins great cash mop-up as banks repay 296 bln euros of loans

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FILE PHOTO: A sign outside the European Central Bank building in Frankfurt, Germany October 27, 2022. REUTERS/Wolfgang Rattay

The European Central Bank is set to begin the biggest withdrawal of cash from the euro zone’s banking system in its history, as it gives banks a first chance to repay hundreds of billions of euros in ECB loans.

The move is part of ECB efforts to fight record-high inflation in the euro zone by raising the cost of credit and it is its first step towards mopping up even more liquidity next year by trimming its multi-trillion-euro bond portfolio.

The euro zone’s central bank will announce this morning how much banks plan to repay of the two point one -trillion-euros multi-year credit they have taken under its Targeted Longer-Term Refinancing Operations TLTRO.

While this early TLTRO reimbursement is voluntary, the ECB has given banks an incentive to get rid of those loans by taking away a rate subsidy last month.

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