Portuguese banks’ borrowings from the European Central Bank jumped to a new record in March as they took advantage of its offer of cheap long-term funds because other banks were reluctant to lend them money.
The Bank of Portugal said on its website on Monday cumulative borrowing at the end of last month rose 18 percent to 56.3 billion euros from February.
That exceeded the previous record of 49.1 billion set in August 2010, before debt-laden Portugal took an EU/IMF bailout last year.
Banks in the euro zone have grown more distrustful of each other since the common currency area’s debt crisis deepened last year.
The ECB sought to inject liquidity into the banking system with two offers of ultra-cheap long-term funds, known as LTROs, in December and late February totaling about a trillion euros.
The March data reflected Portuguese banks’ take-up of the February offer. “I think it’s natural and reasonable for banks to have taken advantage of these funds under the circumstances, especially after the ECB relaxed some collateral requirements before February’s injection,” said Teresa Gil Pinheiro, chief economist at Banco BPI in Lisbon.
“The LTRO injection was in late February so it’s natural that it is registered in March.”
Bank of Portugal head Carlos Costa said last month that over 80 percent of ECB money borrowed by Portuguese banks was now three-year funding, which means the banks had a stable source of liquidity for years to come.
Portugal is implementing austerity measures under the 78-billion euro EU/IMF bailout deal, which includes a 12 billion euro line for banks to recapitalize.
Banks have been deleveraging to improve their capital ratios in line with new European requirements, Reuters reported.