ECB relief as banks repay €442bn loans
THE EUROPEAN Central Bank breathed a sigh of relief yesterday as banks repaid a record €442bn (£365bn) in year-long emergency loans.
Demand for short-term credit was lower than expected, with Eurozone banks taking out €403bn (£332bn) in stopgap loans to keep liquidity during the repayment period.
More than 1,100 banks paid back the 12-month loans that were offered by the ECB at the peak of the crisis.
The central bank said 78 firms took out six-day loans worth €111.2bn (£90bn) yesterday, following 171 who borrowed over three months on Wednesday, and 153 who took week-long relief sums earlier in the week.
While the demand for further emergency funding was lower than expected, some analysts said concerns that Eurozone banks could struggle to eventually reimburse the ECB remain.
“The funding pressure is significant but not dangerous,” said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott in Philadelphia.
The ECB had worried that Spanish and Greek banks might struggle to pay, after several institutions called publicly for the ECB to delay calling in the funding.
City analysts closely watched the repayments for signs of the liquidity issues that contributed to the crisis in 2008.
“The euro area banking sector as a whole was not as strapped for liquidity as it had appeared,” said Klaus Baader from Societe Generale in a note
FAST FACTS | ECB EMERGENCY FUNDS
The ECB is reducing the length of loans to commercial banks to gradually normalise conditions.
It is still providing as much cash as banks ask for to keep credit flowing to the wider economy.