Euro tensions fade as banks repay ECB

Euro tensions fade as banks repay ECB

FRANKFURT - New evidence suggested Friday that the eurozone might finally be emerging from its crisis with a European Central Bank announcement that banks were starting to repay some emergency loans ahead of time.

In an unprecedented move a year ago, the ECB pumped more than 1 trillion euros (S$1.66 trillion) into the banking sector to avert a looming credit crunch in the 17 countries that share the single currency.

At the time, the ultra-cheap three-year loans - known as long-term refinancing operations or LTROs - were credited with marking a turning point in market sentiment towards the embattled euro.

The LTROs were launched in two batches, in December 2011 and February 2012 and both included provisions to allow early repayment after one year, with the first repayment window opening on Jan. 30, and the second on Feb 27.

After that, repayments can continue on a weekly basis, depending on demand.

In a widely watched announcement on Friday, the ECB said that 278 banks would repay 137.16 billion euros of the first 489-billion-euro LTRO on Jan 30.

That is much more than the 100 billion euros expected by analysts.

Some experts believe the magnitude of the repayments is a sign of the improved health of the financial markets as it suggests banks are enjoying better access to funding.

The euro certainly spiked higher on the news, rising to US$1.3436.

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