What could the ECB's structural LTROs look like?

The ECB could start discussions about the design of structural LTROs towards the end of this year, but the launch date depends on banks’ demand for reserves. We believe 12 months is a plausible maturity for these operations. Moreover, the ECB may issue the LTROs by auction, instead of the fixed-rate, full-allotment procedure. The availability of 12-month LTROs could compress term funding rates a bit, but it will not fully offset the effect of declining liquidity.