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Bank deposits at ECB plunge after 195 bln drain

Source: Reuters - Wed 9th Sep 2009

Overnight bank deposits at the European Central Bank dropped sharply, data showed on Wednesday, distorted by the fact it siphoned almost 200 billion euros out of the banking system overnight.

Banks deposited 30.5 billion euros at the ECB overnight on Sept. 8, compared to 163.829 billion euros deposited previously.

The ECB drained 195 billion euros from overnight markets on Tuesday after offering banks the chance of getting a higher rate of interest on the cash they deposited.

Banks also increased the amount borrowed from the ECB's overnight account to 2.226 billion from 86 million euros previously.

The amounts parked at the ECB's deposit facility have been high since it flooded money markets with almost half a trillion euros in one-year funds at the end of June.

The ECB and the 16 euro zone national central banks are also buying euro-denominated covered bonds - debt backed by a pool of assets such as mortgage loans that remain on the issuing bank's balance sheet over the next year, from both primary and secondary markets.

The ECB said the total purchased had inched up to 10.466 billion euros from 10.324 billion euros. It means the ECB is now more than 17 percent through the 60 billion euros it has earmarked to spend.

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