FRANKFURT, June 5 (Xinhua) -- The European Central Bank (ECB) on Thursday announced that interest rates of the main refinancing operation, marginal lending facility and deposit facility will be cut to 0.15 percent, 0.4 percent and -0.1 percent respectively.
Addressing a press conference following the governing council meeting, the ECB president Mario Draghi said the rate cut was among "a combination of measures to provide additional monetary policy accommodation and to support lending to the real economy".
The measures also include targeted longer-term refinancing operations, preparatory work related to outright purchases of asset-backed securities and a prolongation of fixed rate, full allotment tender procedures and suspension of the weekly fine-tuning operation sterilizing the liquidity injected under the Securities Markets Program.
The reductions of interest rates will come into effect on June 11, 2014 and the negative rate will also apply to reserve holdings in excess of the minimum reserve requirements and certain other deposits held with the Eurosystem.
For a clear purpose of support bank lending, the ECB put the targeted longer-term refinancing operations (TLTRO) on the table. Draghi explained that counterparties will be entitled to borrow, initially, 7 percent of the total amount of their loans to the euro area non-financial private sector, excluding loans to households for house purchase, outstanding on 30 April 2014.
Two successive TLTROs will be conducted in September and December 2014. In addition, from March 2015 to June 2016, all counterparties will be able to borrow, quarterly, up to three times the amount of their net lending to the euro area non-financial private sector, excluding loans to households for house purchase, over a specific period in excess of a specified benchmark.
All TLTROs will mature in September 2018 in around four years. "The cost is low," said Draghi.