Eurozone banks borrowed $2.8 billion from the European Central Bank's emergency line on Wednesday, one of the biggest weekly take-ups since the financial crisis, as Deutsche Bank's woes and tighter US rules made market funding more difficult. The nine banks were not identified and their reasons for tapping relatively expensive ECB funding are unknown.
But sources at commercial banks said euro zone banks were finding it harder to borrow dollars on the market because of new US rules prompting redemptions from money market funds, the traditional reservoir of bank-to-bank lending. A euro zone central bank source said difficulties at Deutsche Bank, confidence in which has been shaken after it was threatened with a US fine of up to $14 billion, had also made it harder for other euro zone banks to get dollar funding.
This meant banks were turning to the ECB instead, which allows them to borrow as many dollars as they want - provided they have collateral - using a swap line with the Federal Reserve created during the financial crisis. "There were a lot of dollar funding issues in the market for European banks," the central bank source said.