ECB Says Banks Will Repay 3.5 Billion Euros of Three-Year Loans

The European Central Bank said banks will repay 3.5 billion euros ($4.8 billion) of its emergency three-year loans next week.

A total of 27 financial institutions will use the second opportunity for early repayment of the initial three-year loan, the Frankfurt-based ECB said in a statement today. Banks already returned 137.2 billion euros of long-term funds this week. The ECB’s first loan totaled 489 billion euros and banks can make early repayments on a weekly basis.

While the ECB doesn’t provide a breakdown of the institutions returning the loans, some banks have indicated that they’re handing money back. Commerzbank AG, Germany’s second- biggest lender, said it repaid 10 billion euros and Banco Popular Espanol (POP) said it gave back 1.3 billion euros.

Early repayment of the loans is “a positive signal,” ECB council member Ewald Nowotny said last month.

The ECB provided the two tranches of so-called Longer Term Refinancing Operations a year ago after banks stopped lending to each other. Banks have the option of repaying the loans, which were offered at the average of the ECB’s benchmark rate over their duration, after a year.

Economists expected a total of 150 billion euros in early repayment for the first and 139 billion euros for the second tranche, according to a Bloomberg News survey. The first opportunity for banks to repay money from the second tranche, which amounted to 529 billion euros, is Feb. 27.

To contact the reporter on this story: Stefan Riecher in Frankfurt at sriecher@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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