ECB deposits reach a fresh record high

BANKS are storing ever more cash in the European Central Bank’s (ECB) deposit facility, which hit another record high yesterday.

Banks put away €464bn (£383bn) in the facility, which is regarded as a reasonable indication of their desire to horde cash as it means putting away money above and beyond the amount they must hold in their current accounts.

Yet the news coincides with signs of a thaw in interbank funding markets. Data from Dealogic shows that banks issued their highest volumes of unsecured debt since May last year, before Europe’s latest credit crunch took hold.

Banks sold $22.8bn of unsecured debt last week in a rush to get hold of more cash before markets close again. The biggest such deal was by Citigroup, which sold $2.5bn last week. That was followed by the sale of €2.5bn in bonds by both Nordea Bank and RBS-owned ABN Amro, while Rabobank Netherland raised €1.75bn.

The issuances and the high in deposits shows that banks are desperate to accrue and sit on as much cash as possible in order to ride out any further funding crises this year.

The ECB has been pumping cash into the banking system and last week also increased its intervention in government bond markets. Its purchases of sovereign notes rose to €1.1bn, the largest amount it has bought since mid-December.

The figure does not include any purchases it might have made on Friday.