Spanish banks' ECB borrowing reached highest level since 2014
12.06.2020, 10:00

Spanish banks' ECB borrowing reached highest level since 2014

Reuters reports that Spanish banks borrowed around 176 billion euros ($199.3 billion) from the European Central Bank in May, according to Bank of Spain data released on Friday, the most in more than six years.

The figure marked a rise of 8.5 billion euros from the 167.5 billion euros borrowed in April.

In August 2012, Spanish banks had taken an all-time high of 411 billion euros from the ECB, when the country’s financial turmoil reached a peak and weak lenders were granted a 41.3 billion-euro aid package from the European Union that summer.

Banks in the euro zone are expected to apply for cheap new long-term funding lines later this month to help mitigate the impact from the coronavirus outbreak.

With the euro zone’s economy deep in recession and banks bracing for a new wave of non-payments from clients, the European Central Bank said in April it would make loans to banks even cheaper.

In its latest move to support the sector, the ECB said it would now pay banks at least 0.50% and up to 1% if they tap its three-year loan auctions.

Under the new ECB schemes, they will earn 0.50% for one year from June by simply tapping the targeted longer-term refinancing operations (TLTRO) auction and 1% if they pass on the cash to households or companies.

That may prove enticing particularly for lenders in peripheral countries such as Spain, which can use the cash to buy higher-yielding domestic government bonds and pocket the difference in interest rates.

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