UK banks take advantage of cheap EBC cash

Stat of the day: £31bn. The amount borrowed by UK banks last week as hundreds of financial institutions rushed to take part in the ECB's second round of three-year loans.

by Rebecca Burn-Callander
Last Updated: 09 Oct 2013

This wholesale stampede to the ECB vaults has surprised analysts - British banks are finally on an even keel as the eurozone's financial troubles begin to settle. But the lure of the Central Bank's trillion-euro Long Term Refinancing Operation (LTRO) with interest at 1% has proved irresistable. Lloyds Banking Group borrowed the largest amount, taking €13.6bn, Barclays drew down €8.2bn, and HSBC and Royal Bank of Scotland divied up the remaining €18bn between them.

These are just four of the 800 banks and financial institutions to put their hands into the ECB's pocket. That's more than a third of the ECB's entire membership. The money is being used - by the British banks, certainly - to shore up business in the eurozone, espeically Spain and Portugal, which have been highlighted as the new 'danger zones' as Italy and Greece come off the critical list.

But the ECB's new debt facility has come under fire from the financial top dogs, The FT last week uncovered a leaked letter from Bundesbank chief Jens Weidmann to ECB boss Mario Draghi, expressing his concerns about the strategy. The key worries: that the pot of cash could create further imbalances in the euro area and push up inflation.Well, we'll find out if this is the case soon enough...

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