FRANKFURT – The European Central Bank provided more cash today for banks that have been clamouring for money, injecting $370.6 billion (U.S.) in its normal weekly refinancing.
The most recent action followed a Bank of Japan decision today to lend another 800 billion yen ($7.01 billion), which followed a trillion-yen injection ($8.71 billion) the day before.
The Reserve Bank of Australia lent banks 4.57 billion Australian dollars ($3.64 billion) today, after the U.S. Federal Reserve said yesterday it had placed another $3.5 billion into the banking system.
The Bank of England, meanwhile, lent 314 million pounds ($622.3 million) directly to an institution – the first time it has made an emergency loan since the start of the subprime crisis and the resulting credit crunch.
Central banks worldwide have injected billions into money markets this month to calm nervous investors.
The ECB said the 275-billion-euro allotment announced today was about 46 billion euros ($61.9 billion) more than it had estimated, in part because banks that use the euro are still seeking extra cash.
Despite that, today's cash infusion was significantly lower than the ECB's tender last week, when it lent 310 billion euros ($417.7 billion), and also less than the 292.5 billion euros ($393.5 billion) it lent the week before.
The Bank of England said an institution it did not identify sought access to the standing facility, which had last been used on July 17, when an anonymous financial institution tapped the bank for 109 million pounds ($216.02 million).
The standing facility uses a penalty interest rate, or one per cent above the benchmark interest rate, of 5.75 per cent.
The credit crunch started with rising defaults in U.S. subprime mortgages, or home loans made to people with weak credit histories. It has spread because banks have repackaged risky loans with the more reliable, and sold them to a wide range of investors.
The effects have been felt in Europe, especially in Germany, where state-owned wholesale bank Landesbank Sachsen has said it would need a 17.3-billion-euro credit line from other banks to help it counter risk from exposure to the U.S. subprime credit business.
That exposure – along with the troubles at IKB Industriebank AG, which came under the aegis of a several banks to help protect its 8.1 billion euros ($10.92 billion) exposure to U.S. subprime mortgage securities – has riled investors and markets.
Alexander Stuhlmann, the chief executive of German state-owned bank WestLB AG, warned Monday that German banks could find it harder to secure foreign credit.
"We sense a reluctance on the part of foreign partners to extend credit to German banks," he told reporters.
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