European banks get set to return €5.8 billion in crisis loans that were went to them previously. The impetus for this rush to repayment has been spurred on by the European Central Banks’ new policy of offering very cheap four year loans.
This coming repayment schedule for October 22 is nearly the same amount that was repaid last week by the same borrowing institutions. This amount of 5.8 billion exceeds market predictions, which had previously estimated the repayment to total around €4 billion.
These European financial institutions had borrowed this money from the ECB at the height of the debt crisis starting in late 2011 and early 2012. Since the European bank began offering new long-term loans, these financial institutions have sought to pay off the old loans and replace them with new loans under the new rates.
In total, European banks still owe around €300 billion left over from the crisis loans and many European banks are planning to convert these loans before they mature in January and February. Even though these financial institutions can already refinance the existing loans affect extremely low rates of one half a percent, for the new four year loans institutions will have to pay an additional 10 basis points but they will have the advantage of the extended time.
While this deal may seem attractive to some, the ECB has experienced an increase in level of borrowing, lending only €82.6 billion which is less than had been expected. However, the ECB reports that a little over €3.3 billion have been promised to be repaid this week as well as another 2.5 billion being paid back on October 22.