Business | Banking
European banks pump more funds into system
Europe's major central banks rolled out more funding for stressed financial markets on Monday, and Japan promised to offer dollar funds amid signs that commercial banks' need for short-term cash was easing.
- Reuters
- Published: 23:53 September 22, 2008
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Frankfurt: Europe's major central banks rolled out more funding for stressed financial markets on Monday, and Japan promised to offer dollar funds amid signs that commercial banks' need for short-term cash was easing.
The Bank of Japan said it would offer its first-ever dollar funding tomorrow, firming up on earlier commitments, while the UAE central bank said it was launching a Dh50 billion emergency facility.
US government plans sketched out over the weekend to buy bank assets no one else wants helped ease money market tensions worldwide, but demand in European central banks' dollar funding auctions remained strong.
The European Central Bank allotted $40 billion in overnight funds at 3.25 per cent, down from 3.50 per cent on Friday and 4.00 per cent on Thursday - though with banks seeking $82 billion, demand was only a bit weaker than the $101 billion sought at last Thursday's first-ever overnight dollar auction.
The premium over the US Federal Reserve's 2-per cent benchmark interest rate shows the cost banks may have to pass on to consumers and businesses.
Financial markets in general are also looking for signals the rate is heading back towards the Fed benchmark. The Bank of England again failed to allot the full $40 billion it had on offer, though with $26 billion lent overnight at an average rate of 2.056 per cent it was finding more takers, albeit at a lower rate than Friday's 2.803 per cent average.
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