Cautious banks park record sums at ECB

Eurozone banks stashed a record sum with the European Central Bank, data showed yesterday, suggesting tensions in the financial system remain despite huge injections of cash.

Banks parked €485.9 billion with the Frankfurt-based ECB on deposit for 24 hours, beating the record set the previous day.

Lenders gain an interest rate of 0.25 per cent for their cash deposited at the ECB, much less than they would receive on the interbank market. However, they appear to be wary of lending to each other despite the higher gains on offer, preferring instead to keep their money at the ultra-safe ECB.

The phenomenon is especially significant because it comes after eurozone banks borrowed nearly half a trillion euros from the ECB last month in a brand-new three-year lending facility.

The ECB agreed to loan a record €489.2 billion to 532 banks at the end of last year in the longest-ever refinancing operation in a move to avert a possible credit crunch.