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Banks repay E61bn in crisis loans

Friday, February 22 11:47:35

Banks will repay the ECB 61.1 billion euros in the second of two 3-year loans they took from the ECB a year ago, opting to hand back the money in a sign that at least parts of the financial system are returning to health.

However, this was considerably less that markets had expected the banks would repay.

The ECB said today 356 banks had decided to repay funds from the second loan at the earliest opportunity, on Feb. 27. A total of 800 banks tapped the operation in February 2012.

A Reuters poll on Monday estimated banks would return 130 billion euros of the second round of cheap loans, so-called LTROs (long-term refinancing operations).

The ECB lent banks a total of more than 1 trillion euros in twin 3-year, ultra- cheap lending operations in December 2011 and February 2012 - a ploy that ECB President Mario Draghi said "avoided a major, major credit crunch".

Last month, banks opted to repay the ECB 137.2 billion euros of the first of the twin loans at the first opportunity to so, handing more cash back early than expected, which led to higher market interest rates. Reuters