ECB extends unlimited cash loans to euro zone banks

The European Central Bank said it would keep providing unlimited amounts of cash in operations that underpin euro zone lending at fixed rates aimed at unblocking key interbank markets, on Thursday in Frankfurt.

The ECB also planned to reset on January 21 the margins on either side of its main lending rate that it charges for overnight loans and that it pays on deposits from commercial banks. Changing the latter should encourage banks to lend funds to each other because it will lower the rate they can earn from the central bank.

“The intention is to reduce the attractiveness of the standing facility where banks have currently deposited €200 billion ($290 billion) instead of lending the money to other banks,” Commerzbank analyst Michael Schubert said. “The ECB hopes that this measure will help to revive the interbank money market.”

Money markets froze when banks became wary of lending to each other after the US market for high-risk, or subprime mortgages collapsed in mid 2007, and locked up tighter following the failure of the US investment bank Lehman Brothers in mid September.

The ECB had narrowed the spread of the rate paid on commercial bank deposits from 1.0 percentage point to 0.50 points on October 9, effectively making it more interesting for banks to park extra cash at the central bank.

But ECB Governor Axel Weber said this week it should carefully study money markets conditions before deciding on further decreases in its benchmark lending rate, “so the success of this measure may influence the timing of further rate cuts,” Schubert noted. He also pointed out that the measure would take effect after the next ECB council meeting on January 15.

Meanwhile, “the main refinancing operations will continue to be carried out through a fixed rate tender procedure with full allotment beyond the maintenance period ending on 20 January 2009,” the ECB said. “This measure will be in place for as long as needed, and at least until the last allotment of the third maintenance period in 2009 on 31 March,” it added.

By providing as much cash as commercial banks sought at its benchmark lending rate, the ECB has sought to ease tension on interbank money markets that influence the availability of credit to business and households.

The funds help commercial banks maintain minimum reserves needed to underpin lending to companies that make up the broader euro zone economy. “This measure should help to alleviate fears of a liquidity squeeze,” Schubert said.


Emergency numbers fail in several German states

Callers to the emergency numbers 110 and 112 weren’t able to reach operators Thursday morning in several German states.

The 112 emergency number on an ambulance.
The 112 emergency number on an ambulance. Photo: picture alliance/dpa | Boris Roessler

The emergency number 110 for police and 112 for fire crews failed around the country early Thursday morning, with callers unable to reach emergency operators for urgent assistance between about 4:30 am and 5:40 am local time.

The Office for Civil Protection and Disaster Aid is looking into these outages, which were reported in states including Lower Saxony, Baden-Württemberg, and  Brandenburg, and in major cities like Berlin, Cologne, Hamburg, and Frankfurt. Cologne was further affected by cuts to electricity, drinking water, and regular telephone services. Lower Saxony also saw disruptions to the internal phone networks of police and hospitals.

Emergency services are not reporting any more disturbances and people should be able to once again reach 110 and 112 around the country as normal.

Investigators are looking into the problem, but haven’t yet established a cause or any consequences that may have happened due to the outage. Provider Deutsche Telekom says they have ruled out the possibility of an attack by hackers.