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Spain banks' Jan ECB borrowing lowest since Sep '08

Source: Reuters - Mon 14th Feb 2011

Spanish banks borrowed 57 billion euros from the European Central Bank in January, the lowest level in over two years, reflected improved funding conditions for the country and its lenders.

The total was down from 70 billion in December, data from the Bank of Spain showed, and was the lowest level since September 2008.

It was also much less than a borrowing peak of 140 billion euros in July as a number of banks including some smaller ones like Bankinter accessed capital markets.

But compared with before the financial crisis, levels remained relatively high.

For a large part of last year only Spain's larger banks such as Santander and BBVA were able to access markets.

The country's banking sector has been undertaking a second round of restructuring that will see many of its smaller savings banks to seek listings to help improve their balance sheets.

"We continue to see reduced reliance on ECB funding as banks are able to access markets and due to the opening up of clearing houses, which is positive," said Nick Matthews, economist at RBS.

"But it is too early to sound the all-clear, and much will depend on the outcome of euro zone talks in March," he added, referring to proposals to extend the rescue fund (EFSF) used to backstop the region's financial crisis.

Matthews said Spanish borrowing now represented around 14% of all ECB borrowing, down from a peak close to 25% but still above pre-crisis levels averaging 6.5%.

The data showed the net total borrowed was 53 billion, subtracting the amount banks redeposited at the ECB, down from 67 billion euros in December and the lowest since October 2008.

The government has given Spain's savings banks until September to raise capital ratios to 10% or face nationalisation, encouraging some to follow La Caixa in considering listings.

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