Eurozone Banks Park Record Amount of Funds at ECB

Eurozone banks deposited a record amount of overnight funds at the European Central Bank on Tuesday, official data showed Wednesday as banks remain extremely wary of lending to each other.

Banks put 452.03 billion euros ($590.6 billion) on deposit for 24 hours at the European Central Bank, beating the previous record of 411.8 billion euros set on Tuesday.

The level of deposits at the ECB bank is an indicator of the reluctance of banks to lend to each other on the pivotal interbank market.

The money deposited earns an interest rate of 0.25 percent, which is less than the rate available on the interbank market.

Banks become reluctant to lend to each other notably when they are concerned about the capacity of the borrower to repay the loan.

Last week, 523 banks borrowed a record 489.2 billion euros from the ECB in a brand-new three-year lending facility, a move which the European Systemic Risk Board said would ease funding pressures on banks.

The ECB agreed to make the cash available so as to avert a possible credit crunch, charging just 1.0 percent interest.

But the deposit data suggest the banks are now simply parking the cash with the ECB.