Strong take-up of ECB loans expected / ECB unleashes a wall of money

Article reported that the European Central Bank was expected to report strong demand in December 2011 for an offer of unlimited three-year loans after banks were urged to take the funds as part of concerted efforts to ease severe strains across the eurozone’s financial system.

In the event more than 500 banks borrowed a total of €489bn in three-year loans – equivalent to about 5% of eurozone gross domestic product and the largest amount provided in a single ECB liquidity operation on the 21 December 2011.

Governments hopeb the banks would use the cash to buy sovereign bonds, but critics warned the ECB's strategy is risky and could stoke inflation.

ESO: Background information: Draghi urges banks to boost liquidity / Doubts over ECB move to boost bond sales http://www.europeansources.info/record/draghi-urges-banks-to-boost-liquidity-doubts-over-ecb-move-to-boost-bond-sales/

ECB: Press Release, 8.12.11: ECB announces measures to support bank lending and money market activity http://www.ecb.int/press/pr/date/2011/html/pr111208_1.en.html

ESO: Background information: ECB offers new loans to banks in 'worst crisis since WWI' http://www.europeansources.info/record/ecb-offers-new-loans-to-banks-in-worst-crisis-since-wwi/

Spiegel Online International, 21.12.11: ECB's Risky Plan to Flood Banks with Cash http://www.spiegel.de/international/europe/0,1518,805135,00.html

BBC News, 21.12.11: Huge demand for ECB's three-year loans http://www.bbc.co.uk/news/business-16282206

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