Euromoney has stressed that the European Central Bank's (ECB) long-term refinancing operations (LTRO) should be used as emergencies only and not as replacement for the European bank funding market.
After more than 800 banks borrowed over €500 billion of three-year funding at a rate of 1%, market experts have waded in with concerns over the long-term consequences, rather than an immediate sigh of relief that the LTRO will greatly reduce the refinancing risk in the banking sector.
Speaking to Euromoney, Scott Cameron, partner at global law firm Reed Smith, says:
"... the ECB's actions have reduced any incentive for the banks to issue any senior unsecured bonds for the foreseeable future. As the banks make up almost 50% of the corporate bond market, it is not difficult to see how this will cause the market to contract significantly over the next three years. |
For more in-depth LTRO coverage, check out the following stories:
Banks can't dodge the EU sovereign debt crisis |