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The ECB will explore how to prevent banks from shooting profits due to rate hikes

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The European Central Bank (ECB) is studying mechanisms to limit the billionaire profits for banks, as a result of the ultra-cheap loan plan it launched during the pandemic, once it begins to raise interest rates at the end of this month, according to reports Financial Times.

The €2.2 trillion of subsidized loans the ECB gave to banks helped avert a credit crunch when the Covid-19 crisis hit. However, now that the central bank is set to raise interest rates, eurozone lenders are expected to receive a bounty of additional earnings worth up to €24 billion, according to analysts.

The ECB’s Governing Council is scheduled to discuss how it might curb the extra margin that hundreds of banks will be able to get from their subsidized loans simply by depositing them back with the central bank, according to three people familiar with the plans cited by the economic media.

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