UBS Survey Shows Record Demand for ECB’s Next Three-Year Loans

Demand for three-year loans from the European Central Bank will increase to a record amount at the next offering on Feb. 28, UBS AG said, citing a survey.

Euro-area banks will borrow 629 billion euros ($826 billion) from the ECB, according to the median of 317 forecasts in the UBS survey. The ECB allocated a record 489 billion euros in the first three-year tender in December. Forecasts for the second tender ranged from zero to 3 trillion euros, with two- thirds between 400 billion euros and 800 billion euros, UBS said. Its own estimate is 492 billion euros.

The ECB will allocate the funds on Feb. 29. It charges the average of its benchmark rate -- currently 1 percent -- over the period of the loan and banks have the option of repaying after one year. The ECB also satisfies all bids against eligible collateral, leaving the ultimate amount of money it lends in the hands of the banks asking for the funds.

ECB President Mario Draghi has said the first three-year loan helped avert a credit crunch as the region’s debt crisis makes banks wary of lending. Yields on government bonds across the 17-nation euro region have also dropped, suggesting banks are using some of the money to invest in sovereign debt.

UBS chief European economist Stephane Deo said an allotment of more than 500 billion euros in the second operation “would represent banks over-funding” and using the money “to carry trade.”

Of the 317 survey participants, 132 were from UBS, the bank said.

To contact the reporter on this story: Jeff Black in Frankfurt at

To contact the editor responsible for this story: Craig Stirling at

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