FRANKFURT Feb 7 Banks' early repayment of a
chunk of three-year crisis loans they took from the European
Central Bank reflects improved financial market confidence, but
the bank will continue to ensure ample liquidity, ECB chief
Mario Draghi said.
"We will closely monitor conditions in the money markets and
their potential impact on the stance of our monetary policy,
which will remain accommodative with the full allotment mode of
liquidity provision," Draghi told a news conference, referring
to the ECB meeting all banks' bids for cash.
Speaking after the ECB left its main interest rate unchanged
at 0.75 percent, Draghi said banks have repaid 140.6 billion
euros ($190.34 billion) of the 489.2 billion euros they borrowed
in the first of the two three-year long-term refinancing
operations around a year ago.
"This reflects the improvement in financial market
confidence," he added, noting that repayments are at the
discretion of the banks, "who must appropriately assess their
funding situation, their ability to provide new loans to the
economy and their resistance to shocks."
The market-driven unwinding of the crisis funding measures
has fed investors' perceptions that the ECB is in a state of de
facto tightening, in contrast to the looser monetary policy
being pursued in the United States and Japan.
Bank-to-bank lending rates have climbed since the ECB
announced on Jan. 25 that banks would repay early 137 billion
euros in long-term loans - a move that has reduced the amount of
excess liquidity in the financial system.
In total, the ECB pumped more than 1 trillion euros into the
banking system with two offerings of three-year loans, one in
December 2011 and one in February 2012 as it tried to avert a