Medium-Term Solvency Risks Remain Unaddressed

The lower-than-expected take up of ECB three-month loans by banks on June 30 signals that fewer banks are now dependent on short-term financing from the lender of last resort in the eurozone. Markets responded with cautious optimism when 171 undisclosed financial institutions borrowed just EUR131.9bn from the ECB, less than the EUR200.0bn expected by the market. Though this is suggestive a growing number of banks being able to meet short-term financing needs without resorting to ECB loans at below market rates, as yet we remain unconvinced of an improved liquidity situation on the interbank borrowing market.

To read the full article, please choose one of the following options: