The European Central Bank (ECB) made the proposal, but ultimately the banks are making the call. Last week, Mario Draghi's ECB supplied the financial sector with 489.2 billion euros through a three-year loan. This is the largest amount and longest term for any stimulus that it has given in history. Its aim, stated on December 8, was twofold. On the one hand, it wants to "assure that banks have access to liquidity." On the other hand, it wants to "back credit that is provided to homes and businesses." Well, the first goal it has met, but as for the second we will have to wait and see.
According to data collected yesterday, the banks took the majority of this amount, 411.813 billion euros, and did not employ it to provide credit to other lenders or the real economy as of last Friday, just two days after the three-year supercheck was signed.
What they did was return it to the ECB. More specific, the put it into the institution's deposit facility, a mechanism in which the bank can park their money for 24 hours. Never before, neither after the Lehman Brothers collapse in September of 2008 nor after the Greece bailout in spring of 2010, has the sector put so much money into this account.
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Banks are losing money during this maneuver, because currently the ECB only pays 0.25% interest on money that it stores in this particular account, when the loan itself was granted at 1% or even 1.75% in some cases.
