Home > Banking Euro Crisis > Banks Hoarding ECB Cash to Double Company Defaults: Euro Credit

Banks Hoarding ECB Cash to Double Company Defaults: Euro Credit


Quote from recent Bloomberg article

“Banks are using the 489 billion euros they borrowed at 1 percent from the ECB under its three-year longer-term refinancing operation to scoop up government bonds yielding more than 2.5 percentage points extra instead of lending the money to companies.”

Where is the regulator in this activity? Does this mean that the European taxpayer is contributing to the banks’ profits by allowing money to be borrowed at 1%. Furthermore, in the event of a government default how will the bank repay the ECB?

Would it not be more sensible for banks to borrow from the ECB at 1% and then lend to companies at 3-4%. The companies they lend to (assuming sound business practice) would be more likely to repay and the economy would start growing again. This in turn would help reduce unemployment and so it goes on…

Simplesimon8, simple is best.

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