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Image: Michael Probst/AP

ECB pumps €529bn of new cash into European banking system

The second round of unusually lengthy lending sees the ECB lend €529bn to banks, hoping the cash will be passed onward.
Feb 29th 2012, 10:50 AM 1,114 11

THE EUROPEAN CENTRAL BANK has announced almost €530 billion in new loans to the eurozone’s banks, in a second attempt to ease the difficulties of European consumers and companies in borrowing cash.

The ECB this morning said 800 banks had sought €529.53 billion in medium-term loans, which will be issued tomorrow and mature in February 2015.

The ‘longer-term refinancing operation’ marks the second round of longer-than-usual loans from the ECB, which ordinarily lends cash for either one-month or three-month periods.

The longer loans are an attempt to encourage banks to increase their supply of credit to businesses and consumers, a problem which is generally accepted to be key in helping Europe to overcome the current debt crisis.

The first round of loans, announced just before Christmas, saw banks take €489 billion in loans – though figures in early January indicated that banks were hoarding this cash by storing it in the ECB, and accepting a modest loss, instead of lending it out into the markets.

Read: ECB reports biggest-ever demand from banks for cheap loans >

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Gavan Reilly

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