RBS took £5bn of loans from ECB emergency facility
State-backed lender Royal Bank of Scotland (LSE: RBS.L – news) last month used a European Central
Bank emergency borrowing facility to cover a quarter of its total wholesale
funding needs for 2012.
RBS, which is 83pc owned by the taxpayer, took advantage of the ECB long-term
refinancing operation (LTRO) scheme to borrow £5bn of the £20bn of wholesale
funding it needs to replace this year, according to a report by Morgan (KOSDAQ: 019990.KQ – news)
Stanley (Berlin: SYC.BE – news) analysts.
The LTRO was established last month by the ECB to provide three-year loans to
struggling eurozone banks that have found it increasingly difficult to
access the capital markets to meet their funding requirements.
A total of €489bn (£407bn) was borrowed by European banks and analysts expect
lenders to borrow a further €200bn to €500bn when the facility is opened for
a second time in February.
RBS is the only British bank that is known to have used the LTRO. Lloyds
Banking Group said it had not used the facility, while Barclays (LSE: BARC.L – news) and HSBC (LSE: HSBA.L – news)
have not disclosed whether they accessed it or not.
British banks are eligible to borrow ECB funds through subsidiaries based in
eurozone countries. RBS accessed the money using its Dutch subsidiary RBS
NV, which it acquired through the takeover of Dutch financial group ABN Amro.
The heaviest users of the LTRO are reckoned to have been Italian and Spanish
banks, which were responsible for half the total money borrowed.
Italy’s Unicredit (MDD: UCG.MDD – news) is the largest known user of the money, borrowing €12.5bn,
just under half the total amount of wholesale funding the bank needs to
refinance in 2012.
Banca Monte dei Paschi (Milan: BMPS.MI – news) di Siena was the largest user on a proportionate basis,
borrowing €10bn, nearly double the amount of wholesale funding the bank has
coming due this year.
Most of the money borrowed by Italian banks is likely to have been used to buy
Italian government bonds, which has been reflected in a decrease in the
yields on the country’s sovereign debt.
RBS’s use of the LTRO facility is thought likely to be in relation to its
Irish business where it has taken heavy losses.
“It’s hard to see another use for the money. Using the ECB facility to
reduce their tail risk in Ireland (Xetra: A0Q8L3 – news) makes the most sense as far as we can see,”
said one banks analyst.
Friday is the deadline for European banks that require new capital to meet
higher industry requirements to hand in their capital-raising plans to the
European Banking Authority.
Article source: http://uk.finance.yahoo.com/news/rbs-took-5bn-loans-ecb-220842026.html
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