We all remember how the LTRO was supposed to spur lending to the real economy. A quick update on that from Italy, the second biggest consumer of LTRO borrowing (after Spain).
Since the October announcement, banks resident in Italy have added 242 billion euros in assets to their balance sheet. What has accounted for most of that asset growth?
Italian banks added 108 billion in securities of other Italian banks which increased such holdings by 44%. During the same time they added 82 billion in Italian government debt or a 32% increase. Meanwhile, holdings of non-bank, non-sovereign securities declined by 4 billion euros over the same period. Other traditional lending to the non bank, non government sector also declined over the same period by 12 billion euros.
Source: Bank of Italy
Source: Bank of Italy
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