Spanish banks' borrowing from ECB up sharply in August
Spanish banks sharply stepped up borrowing from the European Central Bank in August, the Bank of Spain said on Wednesday, as other sources dried up because of a lack of confidence.
Their borrowing from the ECB shot up 34 percent from the previous month's figure to 69.92 billion euros ($95.0 billion) in the month, the highest level since September 2010, the central bank said.
In August, the amount lent by the ECB to Spanish banks represented 21.4 percent of all of the central bank's loans within the eurozone, up sharply from 14.69 percent in July.
The new borrowings brought the accumulated total debts of Spanish banks at the ECB to 109.79 billion euros, the highest level since August 2010, the bank said.
"This situation results from panic, uncertainty over a possible default by Greece," said Soledad Pellon, an analyst at IG Markets.
"We know the direct effect that a Greek default would have on the French and German banks, who have a lot of Greek debt, but it's impossible to know the contagion effect on that it would have on Spain."
"Fear and the lack of confidence reigns in Spain" and the "interbank market is still not functioning," she said.
As "the banks are not lending to each other, the last refuge for financing is the European Central Bank."
At the peak of the banks' financing stress in July 2010, Spain's banks borrowed 130.2 billion euros from the ECB as they came under intense pressure in the fallout from the Greek debt crisis.
Spain is still struggling to emerge from an economic crisis that began in late 2008 and to convince nervous markets it will not require a bailout similar to those granted Greece, Ireland and Portugal.
The ECB in early August resumed buying Spanish and Italian government debt to try and stem the eurozone crisis.
© 2011 AFP