Bloomberg News

Spain Said to Summon Banks to Urge Borrowing of 3-Year ECB Money

December 28, 2011

Dec. 19 (Bloomberg) -- The Bank of Spain is urging lenders in the country to borrow all the funds they need when the European Central Bank auctions three-year money tomorrow, said two people familiar with a meeting held last week.

Central bank regulators met with treasurers on Dec. 15 to encourage them to use the facility, telling them that the more banks use the facility, the less chance there is of stigma for taking the funds, said the people, who declined to be identified because the meeting was private.

The ECB said on Dec. 8 it planned to offer unlimited funding against collateral for as long as three years to free up the flow of money in the financial system. Banco Bilbao Vizcaya Argentaria SA Chairman Francisco Gonzalez called for the ECB to set up three-year lending operations so that banks can buy public debt in a Nov. 28 column in Financial Times Deutschland.

“You can’t die twice and there is a strong incentive for banks to go for this,” Inigo Lecubarri, who helps manage about $300 million at Abaco Financials Fund in London, said in a phone interview. “There are institutions that don’t have access to the market and are desperate for funds.”

The Dec. 15 meeting was led by Javier Alonso, director of operations, markets and payment systems at the central bank, one of the people said. A spokesman for the Bank of Spain declined to comment in an emailed response.

ECB Vice President Vitor Constancio said he expects “significant” demand for the bank’s three-year loans. “I cannot put a figure to it, but I would think that it would be significant,” Constancio told Bloomberg Television in an interview in Frankfurt today. “It’s an important instrument for banks. They face very high refinancing needs early next year related to the repayment of medium-term debt.”

Banks are already borrowing the most from the ECB since June 2009. The central bank allotted 291.6 billion euros ($379 billion) to 197 bidders in a seven-day refinancing operation on Dec. 13, up from 252.1 billion euros the week before.

--Editors: Mark Gilbert, Tim Quinson

To contact the reporters on this story: Charles Penty in Madrid at cpenty@bloomberg.net Esteban Duarte in Madrid at eduarterubia@bloomberg.net

To contact the editors responsible for this story: Paul Armstrong at parmstrong10@bloomberg.net Frank Connelly at fconnelly@bloomberg.net


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