More cash left at the ECB amid downgrades

AS GREEK protestors and strikers returned to the streets of Athens in fresh clashes with police yesterday Eurozone lenders fled to safety, using the European Central Bank as a safe house for increasing amounts of cash on Tuesday night, figures yesterday showed.

Overnight deposits at the ECB rose to €213bn from €209bn on Monday, the highest volume since July 2010, as fear over another banking crisis grew.

The ECB pays 0.75 per cent interest on overnight deposits compared with 0.997 per cent available in the money markets. Borrowing from the ECB’s so-called “emergency window” edged up to €1.36bn compared to €1.32bn the day before.

Meanwhile, rating agency Moody’s ramped up its wholesale downgrade of debts related to Italy, following its ratings cut for the country earlier in the week. The debt downgrades will make it more expensive for the firms to borrow in the market.

Among the slew of downgrades yesterday were UniCredit, whose long-term debt was cut from Aa3 to A2, oil firm Eni was cut from Aa3 to A1, Poste Italiane from Aa2 to A2 and Intesa Sanpaolo from Aa3 to A2.

Moody’s said on Tuesday that Italy’s high level of debt coupled with the erosion of confidence in the wholesale financial markets had led to the downgrade of the sovereign’s debt from Aa2 to A2. It also warned yesterday that struggling bank Dexia was in line for downgrades.