FRANKFURT Euro zone banks borrowed $2.8 billion from the European Central Bank's emergency line on Wednesday, one of the biggest weekly take-ups since the financial crisis, as Deutsche Bank's woes and tighter U.S. rules made market funding more difficult.
The nine banks were not identified and their reasons for tapping relatively expensive ECB funding are unknown.
But sources at commercial banks said euro zone banks were finding it harder to borrow dollars on the market because of new U.S. rules prompting redemptions from money market funds, the traditional reservoir of bank-to-bank lending.
A euro zone central bank source said difficulties at Deutsche Bank, confidence in which has been shaken after it was threatened with a U.S. fine of up to $14 billion, had also made it harder for other euro zone banks to get dollar funding.
This meant banks were turning to the ECB instead, which allows them to borrow as many dollars as they want -- provided they have collateral -- using a swap line with the Federal Reserve created during the financial crisis.
"There were a lot of dollar funding issues in the market for European banks," the central bank source said.
One measure EURCBS=ICAP of how much it costs a euro zone bank to borrow dollars for three months is now at its highest since 2012, albeit still well off the peaks seen in that year and at the height of the financial crisis in 2008.
Banks' use of the ECB's dollar auction, which is more expensive than borrowing on the market, has declined over the past three years as markets calmed and firms started lending to each other again.
Most auctions since 2014 have received bids worth just tens of millions of dollars while some had none at all, although last week's auction saw a sudden jump in the amount borrowed to $6.35 billion, the highest since 2013.
Dealers said that number was probably inflated by the quarter-end, when the availability of dollars on the market shrinks as balance sheets are whittled down.
But this week's outsized take-up suggested a more fundamental change in market conditions may be happening.
"This kind of stress in the system has been triggered by individual banks in recent weeks," Rainer Guntermann, an analyst at Commerzbank in Frankfurt, said.
"We had some noise out of Italy in recent weeks but in the past week it is likely linked to these stories around Deutsche Bank."
(Additional reporting by John Geddie in London; Editing by Catherine Evans)