FRANKFURT (Reuters) - Banks took 3.713 billion euros ($5 billion)in the European Central Bank’s monthly offer of 3-month funding, some 2.4 billion euros less than the maturing amount, in a sign that banks are not stocking up on fresh ECB cash after paying back some crisis funds early.
Banks on Wednesday return 137.2 billion euros of the 489 billion euros they borrowed roughly a year ago in the first of the ECB’s twin three-year loan offerings.
No substantial pick-up in the ECB’s funding operations this week shows that banks have not simply shifted to shorter maturities, but are beginning to wean themselves off central bank support, an indication that money markets are improving.
The amount of excess liquidity in the banking system dropped by around 140 billion euros as a result.
With less cash in the system, monetary conditions are effectively tightened, but analysts expect that the remaining large amounts of excess liquidity will temper a rise in market interest rates.
Reporting by Eva Kuehnen