Smaller than expected ECB loan
The ECB said 171 institutions subscribed to the three-month refinancing operation, at a flat rate of 1pc. Photo: Bloomberg News
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The European Central Bank (ECB) has said it will lend €131.9bn to banks for three months.
The smaller-than-expected sum that suggests banks' cash needs are easing despite continuing worries about the eurozone debt crisis.
The loan came as a larger batch of 12-month loans is due to expire and sent a hopeful signal on the health of the banking sector and money markets.
The ECB said 171 institutions subscribed to the three-month refinancing operation, at a flat rate of 1pc. It didn't identify them or their nationalities.
Analysts have pointed to the operation as an opportunity for banks to roll over loans from the record €442bn auction carried out last June if needed. Those loans expire on Thursday.
That unusual 12-month operation, to which 1,121 institutions subscribed, was part of the ECB's effort to keep cash moving in the markets and stem further fallout from the financial crisis.
The euro, which has been battered in recent months by worries about eurozone debt, rose after the ECB's announcement, trading as high as $1.2304. Earlier in the day, it had gone as low as $1.2167.
Commerzbank economist Michael Schubert in Frankfurt had predicted that the latest operation would total between €150m and €200m.
He said: "People feared that there is a lot of funding stress within the interbank market, and a low volume of calls means that this fear to a certain degree unfounded."
He said there was a risk that money market rates could rise in the coming weeks as excess liquidity declines - "but it's not certain that this will happen because, of course, banks can borrow from the ECB via the weekly tender operations."
Luca Cazzulani of UniCredit said that "as a first reaction one should read very good news from this: it suggests that liquidity problems may have been overstated in recent weeks."
He said there may be banks that face difficult access to liquidity but expect things to improve over the next three months, so they may have chosen to bid in weekly operations and keep rolling over those loans until funding gets easier.
Press Association
