Source: Arbor Research

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Banks in the EU seem to be going to their central banks a lot more frequently then they used to:

“Euro-zone banks’ overnight deposits with the European Central Bank hit yet another fresh 2011 high Friday ahead of a week that many observers regard as key to solving the euro zone’s sovereign-debt crisis. Banks deposited €332.705 billion ($445.49 billion) with the ECB, the ECB said Monday, hitting a 2011 record for the third day in a row. The deposits were up from €313.763 billion Thursday, hitting a level last seen in June 2010 while edging closer to the all-time high.

When markets are functioning properly, banks deposit a few hundred million euros at the ECB overnight. With the deepening of the euro-zone debt crisis, banks have become reluctant to lend to one another and place their funds with the ECB instead, in the fear that their counterparty may be exposed to week euro-zone sovereign debt.

It is amazing how fragile trust can be . . .

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Source:
ECB Deposits Hit New High
MARGIT FEHER
Wall Street Journal, DECEMBER 5, 2011
http://online.wsj.com/article/SB10001424052970204903804577079760645447248.html

Category: Bailouts, Credit

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

7 Responses to “European Banks Reluctant To Lend To One Another”

  1. DrungoHazewood says:

    No honor…..

  2. JohnnyVee says:

    Its amazing how long it took creditors to start acting rational, i.e., lending is a risky business.

  3. Moss says:

    It takes a rat to know one. The rats are all hoping for the ECB bailout.

  4. JohnnyVee says:

    Moss good point.

    Is it a loss of trust between the banks or a loss of trust that the banks have in the ECB’s ability to bail them out? Me thinks its the latter b/c the banks already know they are insolvent.

  5. HarleyHoward says:

    “It is amazing how fragile trust can be . . . ”

    If there is no honor among thieves, how can there be trust among banks?

    Common Sense from the Heartland – http://howardwemple.com

  6. dead hobo says:

    BR observed:

    Banks in the EU seem to be going to their central banks a lot more frequently then they used to:

    reply:
    ——–
    Hence the value of liquidity offered by central banks. Without such a service and without central banks, we would experience the mother of all depressions. While, I’m sure, some sick fucks motivated by greed (and possibly politics?) wold love to drive the value of all salable assets to $0.00, to me, central banks, managed properly, are examples of excellence in financial innovation.

  7. rd says:

    felix Salmon has an interesting post on how the Bundesbank is nearly out of easily tapped assets to loan out: http://blogs.reuters.com/felix-salmon/2011/12/06/how-the-ecb-could-be-forced-to-print-money/

    The conclusion of the folks he cites is that the ECB will need to learn how to print Euros a la Bernanke soon if they want to avoid a liquidity crisis. The German fear of Weimar hypr-inflation may soon end up between the proverbial rock and hard place.