MasterFeeds: Emergency ECB lending remains elevated

Subscribe in a reader Add to Google Reader or Homepage

Feb 19, 2011

Emergency ECB lending remains elevated

Emergency ECB lending remains elevated

By David Oakley in London and Ralph Atkins in Frankfurt

Published: February 17 2011 20:06 | Last updated: February 18 2011 09:33

Demand for emergency loans from the European Central Bank has stayed at unusually high levels for a second day in a row.

Figures on Friday showed that borrowing through the ECB’s marginal lending facility, which charges penal interest rates and tends to be used by banks in difficulty, rose to €16bn on Thursday.


Eurozone banks the previous day borrowed €15.8bn through the facility, which charges a rate of 1.75 per cent, three-quarters of a percentage point above ECB base rates, raising suspicions a “fat finger” trading error might be to blame.

Borrowing was €1.2bn the previous day and the daily average this year has been just €100m a day.

Thursday’s demand for emergency ECB loans was the highest since June 2009. It matched levels consistently seen about the time of Lehman’s failure, when banks were struggling to finance themselves. Then, lending markets seized up because banks, worried about counter-party risk, were refusing to lend to each other.

Don Smith, economist at Icap, said: “This is an extremely unusual event and at face value should trigger alarm in the market, but there is absolutely no sense of panic, which suggests that this is probably a dealer error – maybe a miscalculation or a ‘fat finger’ on a keyboard.”

Traders can make mistakes in transactions by failing to type in a decimal point or typing in an extra zero. The latest figures showing a second successive day of elevated borrowing could still be due to a trading error were the original borrowing rolled over.

Laurent Fransolet, analyst at Barclays Capital, suggested an alternative explanation: a bank that had become heavily dependent on ECB loans deliberately switched to the central bank’s marginal lending facility rather than using its regular offers of liquidity. Such a move could have been engineered by the ECB in order to “clean” the system, he said.

That would allow it to take a further step next month towards unwinding the extraordinary measures in place to help banks since the collapse of Lehman.

A bank could alternatively have miscalculated the amount of cash it would normally borrow at ECB open market operations.

The eurozone banking system has been returning to normal since the peak of the debt crisis last year, with banks able to borrow in the private interbank lending markets. Many no longer need to rely on ECB funding.

Overnight market lending rates, which plunged because of the huge emergency liquidity pumped into the financial system by the ECB, have now risen back to trade close to the central bank’s refinancing rate of 1 per cent.

The ECB declined to comment, in line with its policy of not giving any details about the lending facility.

Copyright The Financial Times Limited 2011.

FT.com / Capital Markets - Emergency ECB lending remains elevated

Share
-- The MasterFeeds

No comments:

Post a Comment

___________________________________
Commented on The MasterFeeds

ShareThis


The MasterFeeds

MasterSearch

Categories

MasterFeeds News Finance china USA money stocks debt Commodities United States Gold Venezuela Dollars bonds Markets economics trading Banks FED Hedge funds Asia LatAm Oil default Israel credit metals Mining international relations russia central_banks CapitalMarkets HFT democracy zerohedge Euro Silver elections India Iran Japan Middle East SEC bailout Africa Europe Liberalism insider trading Agriculture FX Tech Trade UN VC bitcoin copper corruption real estate Brazil CoronaVirus ForEx Gold Silver NYSE WeWork chavez food Abu Dhabi Arabs EU Facebook France Hamas IPO Maduro SWF TARP Trump Turkey canada goldman government recession revolution war Cannabis Capitalism Citigroup Democrats EIA Hezbollah Jobs Lebanon NASDAQ NYC PDVSA Palestinians Saudi Arabia Softbank Stats Syria Ukraine demographics ponzi socialism 13F AIG Advertising Berkshire Hathaway CBO Cargill Colombia Cryptocurrency ETF Ecuador Emerging Markets Eton Park Google Housing IMF LME Mindich Mongolia OPEC PIIGS Pakistan Palantir Paulson Pensions Peru Politics Potash QE Scams Singapore Spain UK Yuan blockchain companies crash cybersecurity data freedom humor islam kleptocracy nuclear propaganda social networks startups terrorism Airlines Andorra Angola Anti-Israel Apple Automobiles BAC BHP Blackstone COMEX Caracas Coal Communism Crypto DRC DSK Double-Dip EOS Egypt FT Fannie Mae Form Foxconn Freddie GM Gbagbo History ICO Iraq Italy Ivanhoe Ivory Coast JPM Juan Guaido Lava Jato Libya London M+A MasterEnergy Mc Donald's Miami Mugabe Norway Norwegian Odebrecht Oyo PA PPT Panama QE2 Republicans Rio Ron Paul ShengNu Soleimani South Africa Tokens Tunisia UN Watch UNESCO UNHRC Uber VW Wyclef anti-semitism apparel bang dae-ho cash censorship chile clothing coffee cotton derivatives emplyment foreclosures frontrunning haiti infrastructure labor levi's mortgages philosophy shipping social media treasury women