LTRO and TARGET balances.wmv

The video tutorial explains how long-term refinance operations (LTRO) can assist with managing outstanding Target 2 balances, which are significant in the settlement accounts of deficit and surplus National Central Banks, like Italy and Germany. These large balances are causing issues in the payment system. LTROs allow deficit banks to replace discounts with long-term operations, offering a way to settle accounts by canceling and replacing balances with more acceptable terms for institutions like the Bundesbank.

What are the outstanding target 2 balances and how do they relate to the deficit and surplus National Central Banks?

What challenges are posed by the overhang of large balances in the payment system?

How do the Litros allow deficit banks to manage their balances?

What is the proposed method to settle the target 2 balances?

Discuss the implications of replacing target 2 balances with assets that the Bundesbank finds more acceptable.