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Cautious banks park record sums at ECB

Jan 11 2012 12:10 AFP

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Frankfurt - Eurozone banks stashed a record sum with the European Central Bank (ECB), data showed on Wednesday, suggesting tensions in the financial system remain despite huge cash injections.

Banks parked €485.9bn with the Frankfurt-based ECB on deposit for 24 hours, beating the record set the previous day.

Lenders gain an interest rate of 0.25% for their cash deposited at the ECB, much less than they would receive on the interbank market.

However, they appear to be wary of lending to each other despite the higher gains on offer, preferring instead to keep their money at the ultra-safe ECB.

The phenomenon is especially significant because it comes after eurozone banks borrowed nearly half a trillion euros from the ECB last month in a brand new three-year lending facility.

The ECB agreed to loan a record €489.2bn to 532 banks at the end of last year, in the longest-ever refinancing operation in a move to avert a possible credit crunch.

ecb  |  banks
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