Italian and Spanish banks are running out of cash borrowed through the European Central Bank’s three- year-loan program, diminishing their “firepower” to buy government bonds, according to Royal Bank of Scotland Group Plc.
Banks in Italy have spent the equivalent of 46.4 percent of the funds they received from the longer-term refinancing operations, while Spanish ones have used up 42.3 percent, Harvinder Sian, Biagio Lapolla and Simon Peck, interest-rate strategists in London, wrote in a note to clients on April 30, citing ECB data for the period from December to March.
Assuming the banks intended to use about half of the funds to buy higher-yielding sovereign bonds, Italian lenders would have had 6 billion euros ($7.93 billion) left by the end of March, and Spanish banks would have had 16 billion euros remaining, the analysts wrote.
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……….Discretion Minus Rules Equals Uncertainty (McAlvany Audio…click on Audio MP3 to listen)