The need to replace TLTRO funding requires the issuance of more costly bonds and leads to greater competition in deposit markets to attract funding. Furthermore, the recalibration of TLTRO in October 2022 increased the cost of TLTRO borrowing, and restored incentives for voluntary early repayments. The resulting increase in bank funding costs put upward pressure on lending rates and downward pressure on credit supply.
For too long, banks thought their competitors are their fellow bankers; then they accepted the other financial institutions as their competitors. They always thought the technology companies are their enablers; with their help, the banks have been differentiating themselves from the rest of the crowd. The banks never thought the technology companies will be their direct competitors.