The European Central Bank said it will lend banks 111.2 billion euros ($136.5 billion) for six days to help them cope with the expiry of its landmark 12-month loan today.
The Frankfurt-based ECB said 78 banks asked for the six-day funds at the benchmark interest rate of 1 percent. Banks today need to repay 442 billion euros in 12-month loans, the biggest amount ever awarded by the ECB. Banks asked for 131.9 billion euros in three-month loans yesterday, less than economists expected.
Today’s allotment “is a reasonably big number,” said Laurent Bilke, an economist at Nomura International in London. “Together with yesterday’s operation, the funding needs come in on the high side of estimates. However, the banks that are overly reliant on the ECB are on the periphery of Europe, it’s not stress across the board.”
European banking stocks fell, led by Bank of Ireland Plc and Austria’s Raiffeisen International Bank Holding AG. The Bloomberg Europe Banks and Financial Services Index was down 2.2 percent as of 10:38 a.m. in London. The euro was little changed at $1.2290.
Europe’s sovereign debt crisis made financial institutions wary of lending to each other, complicating the ECB’s withdrawal of non-standard stimulus measures used to fight last year’s financial crisis. While the ECB no longer offers banks 12-month loans, the debt crisis has forced it to reintroduce unlimited lending in its three- and six-month refinancing operations and to start buying the bonds of big-deficit governments.
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