Eurozone banks could double or triple bids for ECB funding, FT says

Date: Tuesday 31 Jan 2012

Some large European banks are planning to double, or even triple, the amount of funds that they were going to request from the European Central Bank (ECB) in the February long-term liquidity auction, according to a front page report in today’s Financial Times (FT).

The ECB supplied €489bn in December via this funding facility so as to avoid a liquidity freeze as €230bn in bank bonds mature in the first quarter of this year.

While the FT article suggests that this is a “fresh sign of a liquidity squeeze for lenders”, it also points out that banks are attracted by “the promise of unlimited cheap money”. These “emergency” loans carry an interest rate of only 1%.

JM

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