Borrowings by Spanish Banks From ECB Surged to $96 Billion in August

Spanish banks increased their borrowings from the European Central Bank in August, a month in which the ECB began buying bonds from Spain and Italy to curb Europe’s sovereign-debt crisis.

Net ECB borrowings surged to 69.9 billion euros ($95.5 billion), an 11-month-high, from 52.05 billion euros in July, the Bank of Spain said on its website today.

Divisions among European governments over how to tackle the region’s debt crisis have helped drive up borrowing costs for banks from countries including Spain and Italy, narrowing their access to the wholesale debt markets they need to fund their business. Investors monitor bank use of ECB borrowings to gauge pressure on their ability to tap financing from other sources.

“It just shows that liquidity has become more complicated at a time when the banks can’t issue debt,” said Juan Pablo Lopez, an analyst at Banco Espirito Santo SA in Madrid.

The jump in ECB borrowings by Spanish banks follows a surge in their use by their Italian counterparts, which tapped 85.1 billion euros in funds in August, more than twice the amount they were using in June.

The Bank of Spain also said today that average one-day deposits by Spanish banks at the ECB climbed to 11.3 billion euros from 5.2 billion euros in July. The August number, the highest since the 18.2 billion euros deposited in May last year, may be a sign that banks are more cautious about lending money to other financial firms and prefer to park it at the ECB, said Lopez.

Spanish banks’ use of ECB funds amounts to about 2 percent of banking assets, about the same ratio as Italian lenders. The proportion is about 8 percent for banks in Portugal and 21 percent for Greek banks.

The gap between Spanish and German 10-year borrowing costs narrowed four basis points to 355 basis points today, according to Bloomberg data.

To contact the reporter on this story: Charles Penty in Madrid at cpenty@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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