Bank Lending From ECB Skyrockets
By Geoffrey T. Smith
FRANKFURT—Use of the European Central Bank's emergency marginal-lending facility skyrocketed Wednesday, hitting its highest level in over 19 months, the ECB said Thursday.
The ECB said banks borrowed €15.801 billion ($21.44 billion) from the facility, which charges a punitive rate of 1.75%. The last time it was that high was just before the ECB's first, and largest, injection of 12-month money into the market in June 2009.
The ECB declined to give any explanation for the high figure, which generally reflects acute, if mostly short-lived, liquidity problems at one or more banks.
Use of the facility had been minimal at the start of the year, but had risen to around a daily average of over €700 million in the past week.
Use of the 0.25% deposit facility, where banks have tended to hoard liquidity, stayed at a level which is low by recent standards, at €14.723 billion, down €3.20 billion from Tuesday.
The rise in the use of marginal lending by the ECB is all the more surprising as there were no generalized signs of stress in the money market Wednesday. The benchmark overnight rate for euros, Eonia, eased to 0.7% from 0.749% on Tuesday, its lowest fixing in more than a week.
Equally, in Germany, the largest national money market in the euro zone, overnight money was quoted in a broad range around 0.525% early Thursday.
Despite the ongoing problems of some large German banks, overnight rates tend to be lower in Germany than in the euro zone's periphery, where stress in the banking system has been more widespread in the last year, and where banks have consequently been more dependent on the ECB for their liquidity needs.
The banking systems of Greece, Portugal, Spain and Ireland account for over 60% of ECB lending, despite accounting for less than 20% of euro-zone economic output.
(marketwatch.com)
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