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ECB renews loan offer of 40 billion dollars

Latest update : 2008-09-25

The European Central Bank renewed its offer of 40 billion dollars (27 billion euros) in one-day loans, and commercial banks snapped up the cash amid chronic tension on money markets.

Banks asked for more than 72 billion dollars, the ECB said, adding that a total of 43 financial institutions had placed bids and would pay a slightly higher interest rate of 2.55 percent for the funds.

Commercial banks usually lend and borrow cash on interbank money markets but these have come under severe pressure since the US market for high-risk, or subprime, mortgages collapsed more than a year ago.

The ECB and the US Federal Reserve have established a currency swap so eurozone banks can borrow dollars directly from their central bank as markets worldwide are rocked by ongoing turmoil in the US financial sector.

Major central banks agreed last week to inject hundreds of billions of dollars into money markets that have been battered by the chronic crisis.

Since September 18, the ECB's dollar tenders have generally met with strong demand from financial institutions which need the cash to continue providing the credit on which business depends.

The Bank of England offered a similar amount of dollars on Thursday to British financial institutions.

In Washington meanwhile, the US Congress was wrangling over a 700-billion-dollar rescue plan designed to bail out the troubled financial industry, which is reeling under the weight of bad mortgage loans.

Date created : 2008-09-25