Commercial banks 'increasingly reliant on ECB'

25 August 2011

Commercial banks have upped their reliance on the European Central Bank (ECB) by borrowing €2.82 billion ($4.07 billion) from an emergency lending facility.

The move could be a new indicator of increasing stress for the European banking system and may hint that institutes are having difficulty obtaining money from traditional sources of funding, the Wall Street Journal reports.

In addition, other lenders across the continent are parking considerably large amounts with the ECB, which charges an interest rate of 2.25 per cent to those borrowing from its holdings.

Bert Bruggink, chief financial officer at Rabobank Group NV - which is based in the Netherlands and focuses primarily on food and agribusiness - revealed the institute has turned away funding requests from banks in countries such as Spain, as well as others in southern Europe.

The industry figure explained: "We have become more reluctant in the past weeks. We now make an even more detailed assessment before we provide these loans."

By Claire Archer

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