Wednesday, December 29, 2010

Eurozone banks reluctant to return ECB funds

Financial Times
December 28, 2010

Eurozone end-of-year financial market tensions have been highlighted by the European Central Bank’s failure to reabsorb funds it has spent on buying government bonds to combat the region’s debt crisis.

The euro’s monetary guardian had planned on Tuesday to absorb €73.5bn ($96.5bn) from the eurozone financial system – equivalent to the amount it has spent on government bonds since May. But eurozone banks offered the ECB just over €60bn.

The operation’s failure suggested that banks were reluctant to return funds to the ECB before the year-end period, when they will be under pressure to show strong liquidity on their books.

It was only the second time since the bond-buying programme was launched in May that the ECB has been unable to offset fully sums it has spent on bonds.


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