Banks Stash Funds with ECB; European Banks Put $A449 Billion with the Central Bank

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FRANKFURT: Banks from the 17 countries that use the euro have stashed 347 billion euros ($A449 billion) with the European Central Bank, in another sign that Europe's debt crisis is still putting pressure on the banking system despite massive central bank support.

The figure is the highest for 2011, topping 346.4 billion euros earlier this month.

It's a sign of mistrust in the interbank lending market where banks raise operating funds, suggesting they are depositing money with the central bank at low interest rates because they are afraid to lend it to other banks Co for fear they won't get paid back.

Europe is suffering from a debt crisis marked by concerns that heavily indebted governments such as Italy may be unable to pay off their bonds. That means trouble for banks because they typically hold government bonds.

The large deposits on Thursday come despite the previous day's massive central bank credit operation, in which the ECB let banks borrow as much as they wanted for up to three years. As a result 523 banks took (euro) 489 billion, the largest ECB loan operation in the 13-year history of the euro. …


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