The second of the European Central Bank’s long-term refinancing operations (LTRO) pumped €530 billion (about $713 billion) into the eurozone’s banking system on Wednesday. Finding it difficult to spend that much cash right away, the continent’s banks returned the money to the ECB in overnight deposits Wednesday night that set a record for ECB deposits – €776.94 billion ($1.034 trillion).
Deposits increased by 63% on one night. That’s not to say that all that cash will just sit there for three years, but still it’s an impressive number.
ECB president Mario Draghi has said that the first LTRO provide eurozone banks with the cash to repurchase their own bonds due this year, and that now these banks will be ready to lend more out to business and private borrowers. Eurozone banks are still not interested in lending to one another because none is sure if the assets of another bank are worth anything or nothing. Sound familiar?
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