FRANKFURT, Germany (AP) — Banks from the 17 countries that use the euro stashed euro347 billion ($453 billion) overnight with the European Central Bank on Thursday, in another sign that Europe’s debt crisis is still putting pressure on the banking system.
The figure announced Friday is the highest for 2011, topping euro346.4 billion earlier this month.
Banks use the deposit facility every day in fluctuating amounts to offload excess cash. Heavy recent use suggests that even as the ECB makes more credit available to banks they are depositing some of it — temporarily at least — back with the central bank at low interest rates rather than lending.
One reason to park money in the facility is that banks are unwilling to lend to other banks for fear they won’t be paid back.
Europe is suffering from a debt crisis marked by concerns that heavily indebted governments such as Italy may be unable to pay off their bonds. That means trouble for banks because they typically hold government bonds.
The large deposits follows Wednesday’s massive central bank credit operation, in which the ECB let banks borrow as much as they wanted for up to 3 years. The credit offer was part of a package of bank support measures announced Dec. 8. As a result 523 banks took euro489 billion, the largest ECB loan operation in the 13-year history of the euro. Another three-year credit offering will be held Feb. 28.
The European Central bank has stepped up lending to banks to help them get through the crisis. Some of the banks are finding it extremely difficult to raise money elsewhere, so the bank steps in as lender of last resort, a typical role for central banks in times of turmoil.
The bank has refused to play the same role for governments by buying large amounts of their bonds, saying they must get their debts under control through their own efforts and not wait for a central bank rescue.
It underlined that stance again on Friday by holding down its purchases of government bonds to only euro19 million. The ECB has been buying government bonds on a limited scale, which has helped drive down the borrowing rates that Italy and Spain face in the bond market.