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Banks’ use of ECB overnight deposits at record high

  Banks deposited a record €28.059 billion in overnight funds with the European Central Bank in a sign that concerns about money market lending persist.

 

The European Central Bank said on one of its Reuters information pages ECB40 on Monday that as of Sept. 28, banks had also borrowed €6.788 billion using its overnight loan facility, but this was dwarfed by the deposited amount.

Analysts say the high use of the deposit facility shows banks are reluctant to lend out excess cash on wholesale markets, further worsening liquidity shortfalls.

Banks try to avoid using the ECB’s permanent overnight lending and borrowing facilities because the 5.25% borrowing rate and 3.25% deposit rate are punitive compared with the rates usually available on interbank markets.

Central banks worldwide, including the ECB, have already lent financial markets billions of euros or dollars of extra funding in the past week. (Reuters)