Banks' deposits at ECB down from record high

29th December 2011, Comments 0 comments

The volume of overnight funds held by banks at the European Central Bank has declined from the record highs seen earlier this week, official data showed on Thursday.

Banks put 436.58 billion euros ($564 billion) on deposit at the ECB for 24 hours on Wednesday, down from the record 452.03 billion euros set on Tuesday, according to data published on the central bank's website.

Rising levels of deposits at the ECB are seen as a sign of market tension, since the money deposited earns an interest rate of 0.25 percent, much less than the rate available on the interbank market.

Thus, heavy use of the facility suggests banks favour parking the money at low interest with the ECB rather than lending it to each other.

The phenomenon has been particularly closely watched this week because it comes just days after eurozone banks borrowed a nearly half a trillion euros from the ECB in a brand-new three-year lending facility.

The ECB agreed to loan a record 489.2 billion euros to 532 banks in the longest-ever refinancing operation in a move to avert a possible credit crunch.

But the deposit data suggest the banks are now simply parking the cash with the ECB.

© 2011 AFP

0 Comments To This Article