BdE released data on financing in the Eurosystem for October 2012. On the BdE balance sheet front developments are quite positive. Both MRO and LTRO funding of domestic credit institutions was lower (-€33bn) with most of the drop attributed to lower MRO credit (-€23.4bn). Reserves increased a bit with the deposit facility growing to €25.3bn from €21.75bn in September. The main source of lower funding needs were lower Target2 liabilities which dropped €36.2bn to €383.6bn, back to June levels. Deposits to general government remained quite low at €4.4bn. Overall, the BdE balance sheet suggests easing of money market conditions for Spanish banks.

In the case of financing to the private sector (households and non-financial corporations) developments were mixed. September effective lending flow for households was still quite negative at €2.84bn (down a bit from €3.83bn during August) with housing dropping €2bn, while NFC lending actually registered a positive effective flow of €1.06bn after a strong drop of €11.17bn in August. This made the total quarterly drop much lower and allowed the Spanish economy to register a mild GDP drop. It will be interesting to see if this change persists in the coming months.