March 28 (Bloomberg) -- The European Central Bank said banks will repay 7 billion euros ($9 billion) of 3-year loans next week.
Some 5 banks will return 3.8 billion euros borrowed in the first of the so-called Longer Term Refinancing Operations, and 6 will repay 3.2 billion euros of the second tender, the Frankfurt-based ECB said in a statement today. That takes the total amount of money repaid early to 244.7 billion euros, or 24 percent of the amount lent.
The ECB’s 3-year loans helped prevent a credit crunch last year as European banks shied away from lending in the midst of a worsening debt crisis. With excess liquidity in the financial system still around 365 billion euros, some banks are choosing to take the option to repay the funds, offered at the average of the ECB’s benchmark rate over their duration, early.
ECB President Mario Draghi said on March 7 that the repayments “reflect improvements in financial-market confidence over the last few months and receding financial-market fragmentation,” adding that monetary policy will remain accommodative for “as long as needed.”
The central bank still allows banks to borrow as much money as they want against eligible collateral for periods of one week, one month and three months.
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