Bank deposits hit seven-month low after ECB rate cut

FRANKFURT — Banks parked the lowest amount of cash in overnight deposits at the European Central Bank for nearly seven months, ECB data showed on Thursday, a sign that interbank tensions could be easing.

By (AFP)

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Published: Thu 12 Jul 2012, 5:32 PM

Last updated: Tue 7 Apr 2015, 11:10 AM

Banks deposited 324.9 billion euros ($397 billion) at the Frankfurt-based institution, a massive drop from the 808.5 billion euros parked the day before.

The level was last that low in December 2011.]

On Thursday, the ECB cut the interest rate it pays on these overnight deposits to zero, reducing the incentive to park the cash at the bank.

In two landmark but highly disputed operations in December and February, the ECB offered 1.1 trillion euros at ultra-low rates to banks.

The ECB’s aim was to avert a looming credit crunch, hoping banks would lend the cheap funds to businesses and households and keep credit flowing in the debt-wracked eurozone economy.

However, data suggested the banks were instead taking the money from the ECB and giving it straight back to the ultra-safe institution, fearful of lending it to riskier borrowers like other banks.


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