Business World

Sunday 15 December 2019

Overnight ECB deposits lowest in a year

Overnight deposits with the European Central Bank dropped to the lowest in almost a year yesterday, suggesting banks are more comfortable to lend to each other.

Banks lodged €27.97bn in the ECB’s overnight deposit facility at 0.25pc, compared with €28.52bn the previous day, the Frankfurt-based central bank said in a market notice today. That’s the lowest since November 10, 2009.

“It’s a step in the right direction and shows money markets are a bit calmer,” said Padhraic Garvey, head of developed market strategy at ING Groep NV in Amsterdam.

“Historically, deposits were quite low anyway because the interest rate on it is so low, but during the crisis banks felt safer parking the money with the ECB.”

Deposits reached a record €351bn in June at the height of Europe’s debt crisis, as banks grew more wary of lending to each other.

Irish, Greek, Spanish and Portuguese bond spreads over German bunds have narrowed in recent weeks as investors become more confident that governments will tackle their budget deficits and restructure banking systems.

Excess liquidity in money markets has also declined after the expiry of longer term ECB loans.

On September 30, banks had to repay €75bn in 12-month funds, €18bn in six-month funds and €132bn in three-month loans.

The 12- and six-month loans won’t be renewed as the ECB phases out the non-standard measures used to fight the financial crisis.


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