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Spain banks' ECB borrowing continues slide in Feb

Source: Reuters - Tue 15th Mar 2011

Spanish banks borrowed slightly less from the European Central Bank in February than in the first month of the year, reflecting a further slide in dependence on central bank funds.

Spanish banks borrowed 51 billion euros from the European Central Bank in February, the lowest since September 2008 and below 57 billion euros in January, data from the Bank of Spain showed.

Spanish Banks' ECB borrowing has fallen sharply in recent months, from a record high of 140 billion euros in July, but still remains above levels seen before the financial crisis erupted.

Smaller banks have regained access to funding at the start of the year to some extent, which analysts said reflected gradually improving perceptions of the country's banking system, plus the ability to access capital from different sources.

"It is continuing the trend of improving lending conditions compared with the other weaker periphery. The amount has been falling massively in recent months as there is a degree of confidence in Spain's banks compared with nine months ago," said Giana Giadi, economist at Citi.

She said Spanish bank borrowing from the ECB was approaching more normal levels, suggesting it would be unlikely to fall much more in coming months. Spain's banking sector is undergoing a restructuring process, with its smaller, more indebted savings banks still needing to boost capital by 15 billion euros in order to meet new capital requirements, according to the Bank of Spain.

banking analysts doubt that will be enough given banks could still sustain losses due to their exposure to the damaged property sector. Net borrowing in February, taking off the amount banks redeposited at the ECB, was 49 billion euros, down from 53 billion in the first month of the year.

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