Record deposits at ECB signal banks' uneasiness

Total deposits with the European Central Bank have reached an all-time record of ¿411.8 billion, underlining the reluctance of euro-zone banks to lend.

Total deposits with the European Central Bank (ECB) have reached an all-time record of €411.8 billion (Dh1.97 trillion), underlining the reluctance of euro-zone banks to lend as the continent's debt crisis enters an uncertain new year.

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The deposits, reported by the ECB and dated as of Monday, come as worry intensifies about other facets of the EU economy.

Strong retail sales over the holiday in many countries were a rare bright spot against a backdrop of rising unemployment in France, renewed fear of recession in the UK and IMF warnings of more economic stress ahead next year.

Despite an interest rate of just 0.25 per cent on ECB deposits, banks piled in more money than ever before, seeking a haven from what many observers see as a building global economic storm. Rises in ECB deposits typically indicate that banks are less willing to lend to each other.

Banks have been a major focus in Europe's debt crisis, given their large holdings of government bonds. Amid fears that financially strained countries could push some banks into insolvency, euro-zone authorities sought this year to strengthen their balance sheets.

Last week, the ECB extended €489bn of three-year loans to banks to keep the system liquid and buy time for a political solution to the economic crisis.

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