The European Central Bank said today that it is making up to 131.9 billion euros ($161.5 billion) in loans available to European banks for the next three months. This is considerably less than expected and suggests that banks are in better financial shape than thought originally.
Banks tomorrow need to repay 442 billion euros in 12-month funds, the biggest amount ever awarded by the ECB and a key plank in its efforts to fight the financial crisis last year. Demand for the three-month cash today was a litmus test for the health of Europe’s banking system, economists said.
Demand was “surprisingly low and certainly a lot less than markets expected,” said Nick Kounis, chief European economist at Fortis Bank NV in Amsterdam. “It suggests that while there are certainly stresses in the system in some regions, it’s not as bad across the board as many people thought.”