ECB lends $500 million to eurozone bank

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The European Central Bank said on Wednesday it lent $500 million (366 million euros) to one eurozone bank this week amid concerns banks are having difficulty in obtaining dollar funding via the markets.

The ECB did not name the bank concerned, but it is the second time in a month that banks in the region have taken advantage of the seven-day facility, which the central bank operates with the US Federal Reserve.

Seperately, the ECB, the Federal Reserve, the Bank of England, the Bank of Japan and the Swiss National Bank promised last week to lend dollars to commercial banks for longer terms as the eurozone debt crisis has begun to hit liquidity in the sector.

Some European banks have run into serious problems in borrowing dollars recently because the US funds that normally lend to them have become reluctant to do so for fear of contagion from the eurozone debt crisis.

The combination of the debt crisis and liquidity squeeze threaten to turn into a credit crunch according to some bankers.

© 2011 AFP

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