Bloomberg News

ECB Deposits Rise as Banks More Reluctant to Lend to Each Other

October 21, 2011

Oct. 21 (Bloomberg) -- Lenders increased overnight deposits at the European Central Bank to the most since Oct. 10, while a measure of banks’ reluctance to lend to one another rose for second day.

Banks parked 188 billion euros ($258 billion) at the Frankfurt-based ECB yesterday, up from 182 billion euros on Oct. 19. That compares with a year-to-date average of 61 billion euros.

The Euribor-OIS spread, the difference between the borrowing benchmark and overnight index swaps, was 76 basis points as of 9:35 a.m. in London, from 75 yesterday. The difference reached 89 basis points on Sept. 23, the widest since March 2009.

The cost for European banks to fund in dollars rose, with the three-month cross-currency basis swap -- the rate they pay to convert euro payments into dollars -- at 93 basis points below the euro interbank offered rate, from 92 yesterday.

The one-year basis swap was at 68 basis points under Euribor, from 67. A basis point is 0.01 percentage point.

--Editors: Paul Armstrong, Cecile Gutscher

To contact the reporter on this story: David Goodman in London at dgoodman28@bloomberg.net

To contact the editors responsible for this story: Paul Armstrong at Parmstrong10@bloomberg.net; Daniel Tilles at dtilles@bloomberg.net


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