Banks take 489 billion euros in 3-year ECB loans
FRANKFURT | Wed Dec 21, 2011 8:12am EST
FRANKFURT (Reuters) - Banks took a huge 489 billion euros at the European Central Bank's first ever offering of three-year funding on Wednesday, raising hope a credit crunch can be avoided and that the money may be used to buy Italian and Spanish bonds.
A total of 523 banks borrowed money at the tender with demand way above the 310 billion euros expected by traders polled by Reuters in the run-up to the operation.
The banks' lunge for funding pushed the euro to a one-week high versus the dollar and sparked a rally in stocks.
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"The take-up was massive ... much higher than the expected 300 billion euros. Liquidity on the banking system has now increased considerably." said Annalisa Piazza at Newedge Strategy, adding that the take-up probably came largely from banks in the euro zone's debt-laden states.
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HELP FOR ITALY AND SPAIN?
While an interbank lending crunch may have been avoided, it is much less certain banks will use the money to buy Italian and Spanish government debt, as French President Nicolas Sarkozy has urged, given the competing pressures on them to cut risk, rebuild capital and lend to business.
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Full story: http://www.reuters.com/article/2011/12/21/us-ecb-3yr-loans-idUSTRE7BK0MC20111221
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