UK banks 'turn to ECB loans'

1 March 2012

Banks in the UK are among the many financial institutions hoping to secure cheap three-year loans from the European Central Bank (ECB).

Struggling bodies are looking to benefit from the organisation's second shot of lending, with the monetary handouts now surpassing €1 trillion.

This latest burst is part of the ECB's long-term repo operation and it has resulted in more than 800 banks bidding for payouts that come to €529.5 billion - bringing the combined total, which includes the first wave of loans, to €1.02 trillion.

A number of the UK's biggest banks have been among the main users, with Lloyds Banking Group drawing down €13.5 billion in ECB deals and HSBC grabbing €350 million to add to the €5.2 billion withdrawn in December.

Sir Mervyn King, governor of the Bank of England - also known as the Old Lady of Threadneedle Street - claimed the ECB loans have played a part in preventing a number of the southernmost states in the eurozone suffering a banking collapse.

He stated: "The prospect of a bank run in the eurozone area has been removed by the action of the ECB."

By Asim Shah

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