ECB’s 7-Day Liquidity Tender Erases Yesterday’s Optimism On European Banking Sector Liquidity
From yesterday’s post:
The ECB biggest ever liquidity facility – EUR 442 billion one year maturity is coming due tomorrow. To reduce the strain on the banks, ECB introduced 3 month LRTO (Long-Term Refinancing Operation) which banks could use to refinance the maturing facility.
The market estimate for the LTRO size was EUR 220 billion – EUR 250 billion.
The ECB just announced the results of the operation. Apparently the banks rolled-over (only) EUR 131.9 billion.
Whether this points to improving liquidity in European banking sector or the “good” banks just used cheaper market financing and the “bad” ones borrowed from the ECB remains to be seen. I would go for latter.
Apparently 78 European banks needed additional EUR 111.2 billion in 7 day liquidity. Very small number of liquidity takers implies liquidity issues are concentrated at a relatively small number of banks.
Screen 1. Tender Allotment
Source: Bloomberg