European Banks to Return $4.8 Billion Early

Wayne Ellis

[ECB Building]

European Banks to Return $4.8 Billion Early (Reuters)

Banks across Europe that had to borrow money from the European Central Bank (ECB) to stay afloat during the last few years will be paying back $4.8 billion of those loans next week — earlier than expected. However, that figure still is less than what they were expected to pay back. That’s because the ECB recently cut its refinancing rate to .25 percent, thereby reducing the amount of interest paid by banks on those three-year loans. In paying back the loans early, European banks are slashing their levels of excess liquidity (or cash beyond what’s needed to cover daily transactions). Investors in the European financial community seemed to welcome this news as another indication that the euro zone is recovering.

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