ECB Provides Banks With $120 Billion to Prevent Squeeze

(Bloomberg) --

Banks took 109.1 billion euros ($120 billion) from the European Central Bank in the first installment of interim financing designed to prevent money markets from seizing up during the coronavirus pandemic.

The cash is part of a package of measures the ECB unveiled last week that also included an increase in bond-buying and more favorable terms for its targeted long-term lending program from June.

Until those become available, the central bank is offering weekly operations as a stopgap measure. The interest rate is fixed at the average deposit rate -- currently minus 0.5% -- over the life of the loan. Some 110 banks took part in this week’s 98-day offering.

With governments shutting schools and borders across the euro area to contain the spread of the deadly virus, the 19-nation economy is all but certain to fall into recession. The ECB has said that while there were no material signs of liquidity shortages in the banking system, the new operations will “provide an effective backstop if necessary.”

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