Bloomberg News

ECB Offers Banks 12-Month Loans for First Time Since End of 2009

October 25, 2011

Oct. 25 (Bloomberg) -- The European Central Bank offered euro-area banks unlimited 12-month loans, reintroducing a tool it last used in December 2009 to calm financial markets.

The Frankfurt-based central bank called for bids in a 371- day refinancing operation and also offered 91-day loans. Banks will borrow 70 billion euros ($97 billion) in 12-month funds and 50 billion euros for three months, according to the median forecasts in a Bloomberg News survey of 10 analysts.

The ECB will charge banks the average of its benchmark interest rate, currently at 1.5 percent, over the course of the loans. The allotments in both operations will be announced at about 11:15 a.m. in Frankfurt tomorrow.

Banks are becoming more wary of lending to each other amid concerns about the losses they would face on Greek bond holdings in the event the country defaults or undergoes a debt restructuring. The ECB is responding by stepping up its provision of liquidity to banks to avert a credit crunch. It has already reintroduced an unlimited six-month loan and said last month it will coordinate with the Federal Reserve to provide euro-area banks with dollars.

The ECB will offer a 13-month loan in on Dec. 21.

--Editors: Matthew Brockett, Simone Meier

To contact the reporter on this story: Jeff Black in Frankfurt at jblack25@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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