ECB emergency borrowing triggers euro zone fears

Emergency overnight borrowing from the European Central Bank remained exceptionally elevated for the second day running, strengthening fears that a euro zone bank could be facing serious funding problems.

ECB figures showed banks borrowed more than 16bn euros in high-cost emergency overnight funding – the highest amount since June 2009. The sum compared with the 1.2bn euros borrowed before the figures spiked to more than 15bn.

The ECB gives no breakdown of the borrowing figures and declined to comment when asked for an explanation for the sudden spike.

Traders remained unsure whether the jump was down to a serious funding issue or whether a bank had made an error earlier in the week by not borrowing enough at the ECB's regular weekly tender.

"One can assume it's a bank or a group of banks which cannot easily get money on the open market at a good rate," one trader said.

A number of banks, mainly from the euro zone's most debt-strained countries but also troubled banks in core countries, remain barred from open money markets and almost completely dependent on the ECB for funding.

The extra 0.75 percent banks have to pay for overnight funding normally means it is used only as a last resort.

The surprise jump came just days after banks received their regular injection of weekly ECB funding.

If a bank missed this week's ECB tender, the distortion could last until Tuesday when the next one is scheduled.

The last time before this week that overnight borrowing exceeded 10bn was on 24 June, 2009, when it was 28.7bn euros, the highest ever. This year, emergency overnight borrowing has been above 1 billion euros only twice.

The central bank reported the following daily data on liquidity provision, in millions of euros. Click for full details.