Trichet: ECB to keep unlimited lending through year-end

FRANKFURT (BestGrowthStock) – The European Central Bank extended its liquidity safety net for vulnerable euro zone banks on Thursday, with a commitment to provide unlimited one-week and one-month funding until at least January 18.

It will also offer unlimited funds at its three-month tenders until at least the end of this year.

The ECB “decided to continue to conduct its main refinancing operations, MROs, and its special term refinancing operations with a maturity of one maintenance period as fixed rate (tender: ) procedures with full allotment for as long as necessary and at least until … January 18, 2011,” ECB President Jean-Claude Trichet said at a news conference after the bank left interest rates at 1.0 percent.

“Furthermore, it has decided to conduct the three months longer-term refinancing operations, the LTROs, to be carried out in October, November and December 2010 as fixed-rate tender procedures with full allotment.”

Analysts had expected the extension given uneven economic performance in euro zone countries and continued fragility in the banking sector, especially in countries on the bloc’s


Expectations were sealed when Axel Weber, one of the most conservative ECB Governing Council members, said in a recent interview that he thought the bank should keep unlimited lending in place into next year.

In a Reuters poll, 46 of 49 economists had forecast unlimited liquidity would be extended for all maturities for at least three months.

The ECB has been meeting banks’ demand for cash in full since the financial crisis intensified in late 2008 in a bid to overcome the breakdown in trust between banks.

(Reporting by Marc Jones/Ruth Pitchford; editing by Patrick Graham)

Trichet: ECB to keep unlimited lending through year-end