ECB Says Overnight Deposits Fall To Lowest In Seven Months
July 12, 2012 Leave a comment
The European Central Bank said overnight deposits from financial institutions dropped by more than half to the lowest level in almost seven months after policy makers stopped paying interest for the funds.
Banks in the 17-nation euro region parked 324.9 billion euros ($397.2 billion) at the ECB yesterday, down from 808.5 billion euros the previous day, the Frankfurt-based institution said. That’s the least since Dec. 21.
Financial institutions are no longer remunerated for the money they deposit at the ECB overnight after last week’s interest-rate cuts took effect yesterday. Policy makers reduced the main refinancing rate on July 5 to a record low of 0.75 percent and cut the deposit rate to zero to stimulate credit supply and lending.
“It’s a miracle that banks used the facility at all,” Christoph Rieger, head of fixed-income strategy at Commerzbank AG in Frankfurt, said in an interview. “Most banks are putting their money into reserve accounts instead. There’s no reason to believe that excess liquidity is declining.”