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The amount banks will repay on May 14 is more
than this week's repayments of 1.75 billion euros, and below the
6 billion forecast in a Reuters poll. <ECB/REFI>
Banks are voluntarily offloading the crisis loans they took from
the ECB in late 2011 and early 2012 in anticipation of
Europe-wide bank stress tests, which will over the next couple
of months check how the lenders hold up under certain scenarios.
The tests are part of a broader balance sheet review done by ECB
before it takes over as bank supervisor in November.
The repayments have reduced the amount of spare cash in the
system to levels that have started to put upward pressure on
overnight bank-to-bank lending rates. EONIA has shot above the
ECB's main rate of 0.25 percent several times now.
Excess liquidity, which is the measure of money that banks have
beyond what they need for their day-to-day operations, stood at
77 billion euros on Friday, having hit 180 billion euros earlier
in the week as banks adjust their funding.
ECB President Mario Draghi pointed out on Thursday that recent
volatility in short-term money market rates had not spilled over
into the medium-term and that more liquidity in the EONIA market
was to some extent a positive sign as banks were going back to
the market and fragmentation was receding.
"In other words, banks rely less on the ECB and more on each
other," Draghi said in the post policy meeting news conference.
On Friday, the ECB said six banks would repay 2.609 billion
euros from the first LTRO on May 14, and four banks would pay
back 0.756 billion from the second LTRO.
(Reporting by Eva Taylor)
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