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Banks to return 3.7 billion euros in crisis loans to ECB next week

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(Globalpost/GlobalPost)

FRANKFURT (Reuters) - Banks will return 3.712 billion euros ($5.05 billion) in long-term crisis loans to the European Central Bank next week, ECB data showed, after the ECB started to charge banks for holding their excess cash overnight and promised more long-term loans.

The amount that banks will repay on June 18 is below this week's repayments of 10.588 billion euros, and misses the 7.5 billion forecast in a Reuters poll.

The ECB cut interest rates to record lows - the deposit rate is now below zero - and launched a series of measures to pump money into the sluggish euro zone economy, pledging to do more if needed to fight off the risk of Japan-like deflation.

The measures also include a new 400 billion euro four-year loan scheme to give banks an incentive to increase lending to businesses in the euro zone.

"It will only affect banks' behavior over time," said Frederik Ducrozet, senior economist at Credit Agricole CIB, about the introduction of a negative deposit rate.

Banks, particularly in the periphery, are also waiting to see the details of the new four-year loans before deciding on what to do with their old crisis loans which they took from the ECB in late 2011 and early 2012, Ducrozet added.

On Friday, the ECB said seven banks would repay 1.692 billion euros from the first of those LTROs on June 18 and nine banks would pay back 2.02 billion from the second LTRO.

(Reporting by Eva Taylor; Editing by Gareth Jones)

http://www.globalpost.com/dispatch/news/thomson-reuters/140613/banks-return-37-billion-euros-crisis-loans-ecb-next-week