Banks to repay nearly $9 billion to European Central Bank

Logo_European_Central_BankEuropean banks will repay nearly $9 billion euros of crisis loans to the European Central Bank next week, an amount more than expected but still less than initial repayment efforts.

The repayment amount is more than initially forecast by a Reuters poll of 20 euro money market traders, but the amount is still well under the $177.4 billion repaid by banks when they had the first opportunity to do so, CNBC News reports.

Traders said that the lesser amount can be attributed to the fact that the banks, which did not need the funds, repaid them at the first opportunity, while economic and political uncertainty in Italy and Cyprus led some banks to hold on to the loan money.

The ECB said last week that the banks would repay some of the long-term refinancing operations on Wednesday, with five banks repaying nearly $498 million from the first LTRO and 15 banks repaying $8.32 billion from the second.

Between December 2011 and February 2012, the ECB lent banks more than $1.3 trillion as part of an effort to avoid “a major, major credit crunch,” according to CNBC News.

ECB President Mario Draghi said earlier this month that the repayments are an indicator of increased confidence in the financial system, demonstrating that the central bank’s balance sheet had reduced to the size it was one year ago, adding that the ECB would monitor money market conditions and “their potential impact on the stance of monetary policy,” CNBC News reports.

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