Record level of commercial bank deposits left in ECB
Commercial banks' over- night deposits at the European Central Bank hit a record high of €464bn, data showed yesterday, and traders said they could hit half-a-trillion euro by next week.
High deposits indicate banks prefer the safety of the central bank over the higher rates they could get by lending to each other.
Banks are cash rich after taking €489bn in the ECB's first-ever three-year liquidity operation late last month, and are considering what to do with the money in the longer term.
The liquidity operation was designed to underpin banks' finances and hopefully repair some confidence in the sector, but the sovereign debt crisis means many institutions still lack enough trust to lend to each other and prefer to stash their money at the ECB.
"The market is more or less closed, all the over-liquidity is going back to ECB," the trader said. "Slowly people are getting some longer funding, but there is no easing in the short end."
The ECB pays 0.25pc interest for overnight deposits, well below the 0.357pc for which banks could lend out their spare cash on interbank markets.
Overnight deposits have a tendency to rise toward the end of the month-long reserves maintenance period, which ends on January 17, when banks have fewer options to juggle their funding as they have to show they have the funds required of them.
Shares and rights in UniCredit, Italy's largest bank by assets, were suspended from trading yesterday after rights indicated down 14.2pc in a volatile start.
UniCredit has priced its two-for-one rights issue at €1.943 per share. This is equivalent to a 43pc discount to the theoretical ex-rights price. (Reuters)