Key Euribor bank-to-bank lending rates fell on Friday under the weight of large amounts of excess liquidity in money markets. The three-month Euribor rate, traditionally the main gauge of unsecured bank-to-bank lending, dipped to 0.204 percent from 0.205 percent. The six-month rate eased to 0.405 percent from 0.406 percent. Shorter term one-week rate remained unchanged at 0.079 percent, as did overnight Eonia rate, at 0.093 percent.
Bank-to-bank lending rates have been falling steadily since November last year when news broke that the ECB was going to flood the banking system with ultra-cheap, three-year cash. The bank's decision in July to stop paying interest on overnight deposits has allowed the fall to continue by removing the 0.25 percent floor for the money market. Dollar-priced bank-to-bank Euribor lending rates also stayed unchanged, with three-month rates at 0.59000 percent and overnight rates at 0.30231 percent.The amount of excess cash in the euro zone banking system is extremely high at about 685 billion euros according to Reuters calculations. With that figure set to remain high for the foreseeable future, money market experts have focused on whether the ECB could copy Denmark's example and start charging banks to deposit cash overnight.