Bloomberg News

ECB Says Banks Increased Overnight Deposits to All-Time High

December 29, 2011

(Updates with three-year loan details from fourth paragraph. For more on Europe’s debt crisis, EXT4.)

Dec. 28 (Bloomberg) -- The European Central Bank said overnight deposits from the region’s financial institutions increased to an all-time high.

Euro-area banks parked 452 billion euros ($591 billion) with the Frankfurt-based ECB yesterday, the most since the euro’s introduction in 1999 and up from the previous record of 412 billion euros a day earlier.

The ECB last week lent 523 banks a record 489 billion euros for three years to keep credit flowing to the 17-nation euro economy during the sovereign debt crisis. It lent the money at its benchmark rate of 1 percent. Banks are depositing excess cash back with the ECB at the overnight rate of 0.25 percent, incurring a loss rather than lending it at a better rate.

Barclays Capital estimates the three-year loans injected 193 billion euros of new money into the system, with 296 billion euros accounted for by maturing loans. Since the three-year loans started on Dec. 22, overnight deposits have jumped by 187 billion euros, suggesting banks are parking almost all the additional liquidity back with the ECB.

Analysts including Aline Schuiling, a senior economist at ABN Amro NV in Amsterdam, said yesterday the rush of deposits may not be significant because in the final week of the year some financial institutions are closed and market activity is muted.

--Editors: James Hertling, Leon Mangasarian

To contact the reporter on this story: Matthew Brockett in Frankfurt at mbrockett1@bloomberg.net

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


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