European Banks to Repay 7.7 Billion to ECB

Banks will return 7.675 billion euros ($10.46 billion) of crisis loans early to the European Central Bank next week, the ECB said on Friday, driving the amount of excess liquidity down and closer to the threshold where market interest rates could rise.

By repaying the ECB’s crisis funds early, banks also reduce the level of excess liquidity – the level of cash beyond what they need to cover their day-to-day operations – in the system.

Excess liquidity is now at 217 billion euros, close to levels seen in late 2011, which was just before the ECB flooded the market with more than 1 trillion euros in long-term refinancing operations (LTROs) to ease banks’ funding strains.

After the repayment next week the level will fall further if banks do not increase their uptake in new liquidity operations.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza