The funding cost relief is direct for those banks that use TLTRO financing instead of more expensive market funding. In addition, the TLTROs have indirectly contributed to favourable funding conditions on capital markets through the scarcity effects generated by reduced bond issuance from banks that replace market-based funding with TLTRO borrowing.
The effectiveness of TLTROs can be analysed by comparing the change in lending rates between those banks that participated in the operations and those that did not. The comparison shows that participating banks granted significantly more favourable rates to their corporate clients than their non-participating counterparts, which suggests a sizeable easing of financing conditions for firms, especially in vulnerable countries (see Chart 10).