ECB Says Banks to Make 137 Billion-Euro Loan Repayment Next Week

Bloomberg: The European Central Bank said 278 banks will hand back 137.2 billion euros ($184.4 billion) of its three-year loans next week at the first opportunity for early repayment.

That compares with the median forecast of 84 billion euros in a Bloomberg News survey of economists. Some 150 billion euros of the first three-year loan, which totaled 489 billion euros, will be given back early as banks continue to repay the funds over coming weeks, according to the survey.

he Frankfurt-based central bank flooded financial markets with two tranches of three-year loans, so-called Longer Term Refinancing Operations, a year ago to avert a credit crunch after banks stopped lending because of Europe’s sovereign debt crisis. The first opportunity for financial institutions to return money from the second tranche, which amounted to 529 billion euros, is Feb. 27.

“A bigger cumulative LTRO repayment would be favourable for risk sentiment and market activity,” Lena Komileva, London- based chief economist at G+ Economics Ltd., said today before the numbers were released. “Reduced dependency on the ECB’s life support is synonymous with improved ability for weaker- credit banks to refinance in longer maturities through private funds.”

reporter on this story: Stefan Riecher in Frankfurt