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Spain banks' ECB borrowing eases in Sept

Source: Reuters - Thu 14th Oct 2010

Spanish banks borrowing from the European Central Bank eased for the second month in a row in September, reflecting improving funding conditions even if still holding at high levels.

Data from the Bank of Spain showed borrowing from the ECB fell to 112 billion euros in the past month, down from 126 billion euros in August.

The data also showed the total borrowed was 98 billion euros, subtracting the amount banks then redeposited at the ECB, down from 110 billion in August. That was around 20 percent of total ECB borrowing in the euro zone. The data came after the first fall in ECB borrowing this year in September for Portuguese banks.

Spanish and Portuguese banks saw their access to capital markets abruptly curtailed in the summer after investors piled out of the country's assets fearing they would go the way of Greece.

Analysts said the data were encouraging, even if borrowing might be limited for some time. (Table of banks' use of ECB lending facilities.)

"They bring further good news. There is clear evidence that access to wholesale funding has opened up, at least for part of the banking sector, after the stress test results publication" said Tullia Bucco, economist at UniCredit.

Stress test results at the end of July showed a largely healthy banking sector even if five smaller banks failed.

The ECB has been trying to stem the dependency on some smaller euro zone periphery countries' banks, and on Saturday published new changes to its legal framework aimed at limiting individual banks' ECB borrowing.

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