Huge demand for ECB’s three-year loans: 500 Banks and counting
Eurozone banks have rushed to take out cheap three-year loans offered by the European Central Bank, borrowing 489bn euros ($643bn; £375bn).
The central bank had originally hoped to lend up to 450bn euros to stop another credit crunch crippling the banking system.
Over 500 banks raced to borrow from the scheme, which was far beyond market expectations.
The euro rose sharply on the news, but then fell back later.
When the plan was announced, French President Nicolas Sarkozy said banks could use the money to invest in eurozone sovereign debt.
However, analysts were uncertain if banks will use the money in this way.
“The very heavy take-up of the ECB’s three-year, long-term refinancing operation provides some encouragement that banks’ liquidity needs are being amply met,” said Jonathan Loynes at Capital Economics.
“But while this might help to address recent signs of renewed tensions in credit markets and support bank lending, we remain sceptical of the idea that the operation will ease the sovereign debt crisis too as banks use the funds to purchase large volumes of peripheral government bonds.”