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ECB makes €529bn in emergency loans to European banks ECB hands €529bn in emergency loans to European banks
(40 minutes later)
Europe's banks took up €529bn (£445bn) in emergency loans from the European Central Bank in Wednesday's second long-term refinancing operation (LTRO), taking the total lent to more than €1 trillion.Europe's banks took up €529bn (£445bn) in emergency loans from the European Central Bank in Wednesday's second long-term refinancing operation (LTRO), taking the total lent to more than €1 trillion.
The LTRO, which offers three-year loans, was the key crisis measure introduced by the ECB's governor Mario Draghi last year to stave off the risk of a full-blown credit crunch in the euro area, after he took over from the more orthodox Jean-Claude Trichet. The LTRO, which offers three-year loans, was the key crisis measure introduced by the ECB's governor, Mario Draghi, last year to stave off the risk of a full-blown credit crunch in the euro area, after he took over from the more orthodox Jean-Claude Trichet.
A day after banks were given the opportunity to bid for the funds, the ECB announced that 800 financial institutions in total had borrowed a total of €529.53bn, in line with market forecasts. A day after banks were given the opportunity to bid for the funds, the ECB announced that 800 financial institutions had borrowed a total of €529.53bn, in line with market forecasts.
Analysts said the large number of borrowers suggested smaller banks had been able to tap the cheap loans.Analysts said the large number of borrowers suggested smaller banks had been able to tap the cheap loans.
In the first operation, in December, the ECB lent just under €500bn, and the measure was widely seen as critical to restoring calm to financial markets – and patching up the finances of struggling European banks.In the first operation, in December, the ECB lent just under €500bn, and the measure was widely seen as critical to restoring calm to financial markets – and patching up the finances of struggling European banks.
However, some economists have warned that the LTRO is storing up huge problems for the future, if the eurozone banks have failed to recover strongly enough by the end of the three-year period to allow them to wean themselves off public support. However, some economists have warned that the LTRO is storing up huge problems for the future, if the eurozone banks have failed to recover strongly enough by the end of the three-year period to wean themselves off public support.
Investors had warned that a higher than expected take-up of the LTRO could signal distress among eurozone banks. The euro fell slightly after the news.Investors had warned that a higher than expected take-up of the LTRO could signal distress among eurozone banks. The euro fell slightly after the news.