ECB will lend Euro­pean banks $197 bil­lion

The Pak Banker - - Front Page -

FRANK­FURT: The Euro­pean Cen­tral Bank will lend banks 149.5 bil­lion eu­ros ($196.8 bil­lion) for three months to meet their liq­uid­ity needs over the year-end pe­riod.

The Frank­furt-based ECB said 270 banks asked for the un­lim­ited funds over 98 days, which will be loaned at its av­er­age bench­mark in­ter­est rate over the pe­riod. Banks to­mor­row need to re­pay 96.9 bil­lion eu­ros in ma­tur­ing 12-month loans and 38.2 bil­lion eu­ros in three­month loans on the fol­low­ing day.

The ECB's with­drawal of emer­gency stim­u­lus is be­ing com­pli­cated by con­cerns about the fis­cal health of coun­tries in­clud­ing Ire­land, Spain and Greece. While the cen­tral bank has aban­doned six-and 12-month loans, Pres­i­dent Jean-Claude Trichet said on Dec. 2 that it will keep of­fer­ing banks as much cash as needed through the first quar­ter of 2011 to help re­store lend­ing in the 16-mem­ber euro re­gion. "Banks' liq- uid­ity needs are still pretty high and they re­main de­pen­dent on the ECB," said Ulf Kraus, a fixed-in­come strate­gist at He­laba Trust GmbH in Frank­furt. "The cri­sis is not over yet and to­day's fig­ure shows that the ECB took the right de­ci­sion to con­tinue with the full al­lot­ment."

The ECB is al­ready seek­ing ways to re­duce banks' re­liance on emer­gen­cyliq­uid­ity mea­sures. ECB coun­cil mem­ber Yves Mer­sch told Neue Zuercher Zeitung in an in­ter­view pub­lished on Dec. 11 that the "phe­nom­e­non" of banks' cash de­pen­dence "is be­ing worked on at the moment and we will prob­a­bly present a so­lu­tion" at a meet­ing over the com­ing months.

Banks, concerned about the cred­it­wor­thi­ness of some of their coun­ter­parts, yes­ter­day lodged 61.2 bil­lion eu­ros in the ECB's de­posit fa­cil­ity, the cen­tral bank said in a sep­a­rate state­ment to­day. That's up from 28.5 bil­lion eu­ros on De­cem­ber. 16. -PB News

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