Wall Street Journal
December 28, 2011
The European Central Bank turned the fire hose on the euro-zone banking system last week. The fire is still burning, but the liquidity has simply returned to flood the ECB’s basement — at least for the time being.
The amount of money parked by euro-zone banks in the ECB’s 0.25% deposit facility surged to another new record of €452.03 billion Tuesday, up from €411.81 billion over the Christmas break and well above the previous record high of €384 billion.
Use of the deposit facility is frequently seen as an indicator of stress in the financial system, but the latest surge probably doesn’t reflect any deterioration in the situation since last week. “This is just a mirror image of the liquidity that the ECB is pushing into the system,” said Jacques Cailloux, chief euro-zone economist at Royal Bank of Scotland in London.