FRANKFURT, April 30 (Reuters) - Euro zone banks took 13.193 billion euros ($18.23 billion) in loans from the European Central Bank at its three-month tender on Wednesday, almost three-times the amount that was due to mature.
The jump comes as banks are balancing out a steady decline in extra cash in the system, driven by early repayments of crisis loans lenders took from the ECB at the height of the European debt crisis.
On Wednesday, 97 banks took 13.193 billion euros from the ECB compared with 4.955 billion euros maturing. It was the largest three-month take-up since the December tender when banks stocked up on funds to ride out end-of-year market tension.
On Tuesday banks scooped up more funds at the ECB’s weekly tender than at any time since the last week of June 2012, beating expectations in a Reuters poll.
Banks have started to repay their crisis loans early as funding conditions began to improve and to shore up their balance sheets in the run-up to the ECB’s health check of banks, which it will start to monitor in November.
Fitch Ratings, in a report on Wednesday, said the long-term refinancing operations (LTROs) had generally been beneficial to banks’ credit profiles.
“However, some banks remain dependent on the LTROs as a funding source and are likely to be rolled over into the ECB’s main refinancing operations or other short-term funding,” Fitch said, adding that such dependence was negative for ratings.
It said Italian banks’ repayments were slower than in most other European countries relative to usage, highlighting the mixed repayment patterns among peripheral euro zone banks and the broader differences between banks in northern and southern Europe.
As a result of the repayments, excess liquidity , the money banks hold in excess of their daily operational needs, has fallen, hitting 80 billion euros on Wednesday, according to Reuters calculations, a level last seen before the ECB handed out the crisis loans in December 2011.
This has pushed up overnight bank-to-bank lending rates.
EONIA rose to 0.457 percent on Tuesday - its highest since 2011 with the exception of one liquidity-tight day at the end of the first quarter. It has been above the ECB’s main refinancing rate of 0.25 percent for four sessions in a row.
The ECB is watching this development carefully, having identified an “unwarranted” tightening of short-term money market rates as one of the scenarios that could prompt fresh policy action. ($1 = 0.7237 euros) (Reporting by Eva Taylor; Editing by Susan Fenton)