European banks signaled they will repay just 61 billion euros
($80.71 billion) of cheap loans they borrowed from the European
Central Bank at its second three-year tender one year ago, far
lower than market expectations, indicating that some banks are
still not ready to rely solely on the normal funding markets.
The ECB will get back EUR61.1 billion from 356 banks Feb. 27,
the first day that the second three-year loan can be repaid and
nearly two years before they are due, the Frankfurt-based ECB said
Friday. The figure fell short of market expectations of around
EUR130 billion.
The figure represents just under 12% of the EUR529 billion that
800 banks tapped from the ECB in February 2012. The ECB said also
that nine banks next week will repay EUR1.74 billion of loans taken
under the first three-year tender issued in December 2011. The
repayments now total EUR212.3 billion, or around 21%, of the
EUR1.02 trillion borrowed from the ECB through both three-year
loans.
By removing money from the financial system, the repayment risks
hiking the cost of short-term borrowing on the money market, which
could in turn make loans to firms and households more pricey at a
time when the euro-zone economy is battling a recession.
Analysts and ECB officials played down that risk ahead of
Friday's announcement. Earlier this month, ECB President Mario
Draghi called the early repayments of the long-term loans "a sign
of confidence," and said excess liquidity in the money market will
still be well over EUR200 billion after its estimates for repayment
of the second long-term refinancing operation.
The ECB declined to give a national breakdown of those banks
that are repaying and few banks have so far disclosed their plans.
Banks in Spain and Italy were, proportionately, the greatest users
of the second long-term refinancing operation. Commerzbank AG
(CBK.XE), Germany's second-largest bank, has said it would repay
the EUR6.2 billion it borrowed from the ECB last year at the end of
this month.
(Todd Buell in Frankfurt contributed to this article)
Write to Christopher Lawton at christopher.lawton@wsj.com
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