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THE STATE OF THE EUROPEAN UNION
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banking sector without any type of conditional-
ity and, in practice, alongside bank credit to the
Eurozone’s real economy, a substantial part of
the resources are allocated to other purposes,
such as the purchase of tangible or financial as-
sets, credit to customers located outside the
Eurozone and even the simple refinancing of
the recipient financial institution, either with a
view to improving its liquidity or replacing an-
other type of current liability.
The fact that the banks can make this type
of use of public resources is striking in itself. Yet
there are two circumstances that prove even
more surprising: on the one hand, the high-
profile manner in which this massive diversion
of resources takes place; on the other, the enor-
mousness of the resources diverted from their
purpose, which frequently appears to have even
a majority impact in the quantitative easing op-
erations.
The scale of the problem
It is certainly difficult to accurately quantify the
amount of aid transferred to the banking sector
by monetary policy that is diverted to other pur-
poses –primarily because of the lack of informa-
tion available. The banks that receive the ECB’s
subsidised loans are not even required to report
on the use made of those resources.
To date, the TLTRO 2014-16 has been the
only programme to have demanded from the
recipient banks some sort of requirement on the
use to be made of the funds received –very gen-
eral requirements that have proven clearly inef-
fective as far as securing the goal of channelling
the monetary expansion towards Europe’s real
economy is concerned.
Every quarter, the ECB publishes the results
of a “survey”, the “Euro area bank lending
survey”, in which the banks are quizzed about
the uses made of the quantitative easing pro-
grammes. It is a merely “qualitative” survey,
from which –as we shall see– it is practically im-
possible to draw quantified conclusions.
Some type of analysis on the matter was at-
tempted in Issue 7/2015 of the
ECB Economic
Bulletin
, which published the article “The trans-
mission of the recent non-standard monetary
policy measures”.
From the point of view of our report, the con-
clusions of the article are disappointing: “The
empirical evidence suggests that these policies
have successfully improved credit conditions
in the euro area and supported the ongoing
recovery in lending activity. The TLTROs and
Asset Purchase Programme have significantly
lowered yields in a broad set of financial market
segments. Reductions in bank bond yields, i.e.
less expensive market-based financing for
banks, have improved their funding costs, ena-
bling a more forthcoming bank attitude towards
lending. Overall, the non-standard measures
have helped to push the intended monetary
policy accommodation through the intermedia-
tion chain to reach final borrowers, i.e. house-
holds and firms. This contributes to the recovery
in lending and economic activity, which is ex-
pected to produce a sustained adjustment of
inflation rates towards levels below, but close
to, 2 % over the medium term”.
As we see, not a word about what we are
concerned with in this work, that is to say, about
the extent to which the resources provided to
the banking system have been allocated to their
purpose. The fact that these extraordinary pro-
grammes should have positive effects on boost-
ing lending and reducing interest rates seems
almost inevitable. It could hardly be any other
way after allocating no less than 28 % of
Eurozone GDP to the banking system. The key