European banks must pay back almost half a trillion euros to the European Central Bank on July 1 as the ECB’s first-ever one-year loans fall due, potentially putting pressure on banks’ ability to refinance and on money market interest rates.
But the ECB is confident it has put the necessary crash protection in place, with offers of unlimited three-month and six-day funds on the menu next week to make sure banks are not starved for funds.
”We have taken all precautions,” Austrian central bank governor Ewald Nowotny assured journalists on Friday. “We are confident that this will all occur without tensions.”
The rates banks charge amongst themselves for funds are already at their highest levels in nearly nine months, while banks in countries like Spain, Portugal and Greece are effectively shut out from markets and borrowing record sums from their local central banks.
Not all are convinced that the ECB can pull ofs its liquidity juggling act without dropping at least one ball.