European Central Bank offers banks a safe haven

BANKS accepted lowly returns on their cash from the European Central Bank (ECB) yesterday, highlighting the appeal of the ECB’s safe-haven status in the ongoing environment of money market tension.

The ECB comfortably attracted the €61bn (£50.6bn) it needed from banks to offset the controversial Eurozone government bond purchases it has made since May.

The ECB paid a weighted average interest rate of 0.33 per cent on the one-week deposits, the same as a week earlier.

It is also well below the 0.5 per cent available on open markets, highlighting banks’ preference to park cash at the ECB rather than lend it more profitably to peers.

The ECB takes seven-day deposits from banks on a weekly basis to match the amount it has spent buying government bonds – a controversial tactic it turned to in May in a bid to calm the Eurozone government debt crisis.