Banks to repay ECB 7 billion euros of crisis loans

FRANKFURT (Reuters) - Banks will return early 7.005 billion euros (5.9 billion pounds) of crisis loans to the European Central Bank next week, repaying more than expected as a bailout deal for Cyprus averted financial meltdown on the island and reduced the risk of a liquidity crunch.

In a last-minute deal in the early hours of Monday, Cyprus agreed to close its second-largest bank and inflict heavy losses on uninsured depositors in return for a 10-billion-euro bailout, averting a chaotic default.

The European Central Bank allowed further emergency funding for Cypriot banks following the agreement.

But concern remains as the island imposed tight capital controls to prevent a run on deposits as its banks opened again on Thursday having been closed for almost two weeks.

Banks had become more reluctant to repay early the ECB's 3-year crisis loans in recent weeks. In total, the ECB lent banks more than 1 trillion euros in the twin 3-year, ultra-cheap lending operations in December 2011 and February 2012.

On Thursday, a day earlier than usual due to the Easter holiday, the ECB said 5 banks would repay 3.845 billion euros from the first so-called long-term refinancing operations (LTROs) on April 3, and 6 banks would repay 3.160 billion euros from the second.

The combined sum they are returning is more than in each of the previous three repayment rounds

The Reuters poll had forecast a total of 3 billion euros, a far cry from the 137.2 billion euros banks repaid when the first window to do so opened up.

(Reporting by Eva Kuehnen and Paul Carrel)