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The level of overnight deposits with the European Central Bank rose to a record yesterday as the sovereign debt crisis made banks apprehensive of lending to each other, according to Bloomberg, as quoted by Agerpres.
According to data published yesterday, by the ECB, European banks lodged 320.4 billion euros ($394 billion) in the ECB"s overnight deposit facility at 0.25 percent, up o.25% from 316.4 billion euros the previous day. This is the largest amount ever deposited since the beginning of the Euro in 1999. Over the last five days however, overnight deposits with the ECB have exceeded EUR 300 billion.
The banks prefer placing money with the ECB at an interest rate of 0.25%, fearing the 750 billion-euro rescue package may not be enough to stop the crisis from spreading and spilling into the banking sector.
"The news of the last few weeks have worried banks and since nobody knows the individual exposure of each individual financial institution, it"s deemed safer to park cash with the ECB rather than lend it to other banks", said Commerzbank AG analyst, Norbert Aul.
Banks borrowed 9 million euros from the ECB at the marginal rate of 1.75 percent.
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