Europe's ailing banks have repaid less than expected in emergency funding provided by the European Central Bank. Their reluctance may indicate that financial stress in the eurozone banking sector persists.
About 356 eurozone banks offered to repay emergency liquidity worth 61.1 billion euros ($80.5 billion), the European Central Bank (ECB) said Friday.
The bank said they agreed to use a repayment window opening on February 27 under ECB provisions allowing for early repayment of three-year loans provided by the ECB about a year ago.
In December 2011, the ECB injected 468 billion euros of ultra-cheap loans into the eurozone banking system to avert a looming credit crunch as a result of widening distrust among banks. Another 529 billion euros were provided by the central bank in February 2012.
Both rounds of these so-called long-term refinancing operations (LTRO) included provisions for repayment on January 30 and February 27 this year at the earliest.
At the end of January, about 278 financial institutions had already stepped forward to repay loans worth 137 billion euros, the ECB said. Therefore, analysts were disappointed by the considerably lower sum of pledges made for the February 27 window.
Notably, financial institutions in the more stable eurozone countries should have been able to repay their loans early, Joachim Nagel, a board member of Germany's central bank, the Bundesbank, told Reuters news agency.
He warned against calling the banking crisis over, saying the amount of excess ECB liquidity in the markets was an important indicator of the health of the banking system.
Only if this excess liquidity was significantly reduced through repayment, he added, could the ECB consider ending its crisis-fighting policy.
uhe, tm (Reuters, AFP)