ECB Says Banks to Repay Less Than Forecast of Second Loan
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The European Central Bank said banks will return 61.1 billion euros ($80.5 billion) of its second three-year loan next week, half the amount forecast by economists.
Some 356 financial institutions will hand back the money on Feb. 27, the first opportunity for early repayment of the second Longer Term Refinancing Operation, the ECB said in a statement today. The median forecast of economists in a Bloomberg News survey was for 122.5 billion euros to be repaid. The euro fell almost half a cent after the report to $1.3157.
The ECB flooded financial markets with more than 1 trillion euros in three-year loans a year ago after banks stopped lending to each other because of Europe’s debt crisis. Banks have the option of repaying the loans, which were offered at the average of the ECB’s benchmark rate over their duration, after 12 months.
“The ECB will welcome the repayment as long as banks make it for the right reasons,” said Nick Matthews, senior economist at Nomura International Plc in London. “If banks are comfortable that they don’t need the money anymore or can get funding in the market, it’s alright. The last thing you want though is to see banks rushing to repay, only to get into trouble because they don’t have their funding in place.”
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