ECB weekly statement upate – 22/3/2012

Here are a few comments on ECB’s latest financial statement for the week ending at 16 March 2012:

• Deposits related to margin calls dropped to nearly zero (a decrease of more than 17 billion €). This is clearly a very positive sign, highlighting the fact that the collateral posted by European banks to the ECB in its refinancing operations achieved a value close to the one during the loans inception. There was also a drop in the deposit facility which was offset by increased usage of the current accounts.
• ECB’s lending to financial institutions increased by more than 31 billion €. The troubling fact was that 11 billion € came from increased use of the marginal lending facility (an overnight facility). Another 24.6 billion € are attributed to the latest MRO which came at 42 billion €, a number much larger than the recent MROs after the second LTRO. On the other hand, the ‘Other assets’ category dropped by 45,6 billion €. In it’s recent February balance sheet, the central bank of Italy had a fine-tuning (??) operation of 46.9 billion €, which was booked as ‘Other assets’ in ECB’s weekly statement. It seems that this operation probably ended this week and was replaced by increased short-term funding through the MRO and marginal lending facility, keeping total bank funding steady.