The European Central Bank will lend banks euro 149.5 billion ($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 euro 96.9 billion in maturing 12-month loans and euro 38.2 billion in three-month 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 December 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’ liquidity 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 emergency-liquidity measures. ECB council member Yves Mersch told Neue Zuercher Zeitung in an interview published on December 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 euro 61.2 billion in the ECB’s deposit facility, the central bank said in a separate statement today.