Division 3 Calculation of interest rate

Let NS_{Jan 2018} denote the amount obtained by summing the eligible net lending over the period 1 February 2016 to 31 January 2018 and the amount of eligible loans outstanding as at 31 January 2016; this is calculated as NS_{Jan 2018} = OL_{Jan 2016} + NL_{Feb 2016} + NL_{March 2016} + … + NL_{Jan 2018}

Denote now EX by the percentage deviation of NS_{Jan 2018} from the benchmark outstanding amount, that is,

Where OAB is equal to zero, EX is deemed to equal 2,5.

Let r_k be an interest rate to be applied for TLTRO-II k. Let MRO_k and DF_k be the main refinancing operation (MRO) rate and the deposit facility rate, expressed as annual percentage rates, prevailing at the time of allotment of TLTRO-II k, respectively. The interest rate is determined as follows:

1. (a)

   If a participant does not exceed its benchmark outstanding amount of eligible loans as at 31 January 2018, the interest rate to be applied to all amounts borrowed by the participant under TLTROs-II equals the MRO rate applicable at the time of the allotment of each TLTRO-II, that is:

   if EX ≤ 0, then r_k = MRO_k .

2. (b)

   If a participant exceeds its benchmark outstanding amount of eligible loans by at least 2,5 % as at 31 January 2018, the interest rate to be applied to all amounts borrowed by the participant under TLTROs-II equals the deposit facility rate applicable at the time of the allotment of each TLTRO-II, that is,

   if EX ≥ 2,5, then r_k = DF_k .

3. (c)

   If a participant exceeds its benchmark outstanding amount of eligible loans but by less than by 2,5 % as at 31 January 2018, the interest rate to be applied to all amounts borrowed by the participant under TLTROs-II is graduated linearly depending on the percentage by which the participant exceeds its benchmark outstanding amounts of eligible loans, that is,

   if 0 < EX < 2,5, then $r_k={\mathrm{MRO}}_k-\frac{\left({\mathrm{MRO}}_k-{\mathrm{DF}}_k\right)\times \mathrm{EX}}{\mathrm{2,5}}$ .

   The interest rate will be expressed as an annual percentage rate, rounded down to the next fourth decimal position.