Emergency overnight borrowing from the European Central Bank jumped to a near two-year high, leaving money market traders wondering whether a bank was in trouble or if the spike was down to a simple data input error.
ECB figures showed banks borrowed more than €15 billion in high-cost emergency overnight funding. It is the highest amount since June 2009, compares with the €1.2 billion borrowed the previous night and comes just a day after banks received their regular injection of weekly ECB funding.
Overnight borrowing from the ECB is usually well below €1 billion.
The figures sent jitters through interbank lending markets as dealers tried to determine whether a bank was facing serious funding problems or if it was just a short-term issue.
The extra 0.75 per cent banks have to pay for overnight funding normally means it is used only as a last resort.
"If it was a one-day mistake, it will disappear tomorrow, but if it stays then you start worrying," one euro zone money market trader said.
The ECB, the Bundesbank and a string of other euro zone central banks and commercial banks declined to comment.
Other traders said there was no sign of any bank desperately searching for funding late yesterday, suggesting it may be that a bank simply made a data input error.
Market observers will be watching closely when the ECB's figures are updated around 0810 GMT tomorrow. If the level of borrowing remains equally elevated worries are likely to grow and could spark a renewal of tensions in money markets.
The last time overnight borrowing exceeded €10 billion was on June 24, 2009, when it was €28.7 billion, the highest it has ever been. This year, emergency overnight borrowing has been above €1 billion only twice, both times this week.
A number of banks, mainly from the euro zone's most debt-strained countries but also troubled banks in core countries, remain barred from open money markets and almost completely dependent on the ECB for funding.
If the high figure is due to a mispunch by a borrower, the additional 0.75 interest - which is worked out as if the money was borrowed over a year - will cost the culprit roughly an extra €330,000.
The amount of excess liquidity in the system stands at around €50 billion according to Reuters calculations, having stood at €100 billion at the end of the previous reserves period.
Reuters
