MADRID: Spain's battered banks, struggling to raise money as they await a vast eurozone rescue, pushed borrowing from the European Central Bank (ECB) to a record high in June, data showed Friday.
Loans to Spanish banks from the 17-nation single currency region's banker leapt 17.2 percent from the previous month to an unprecedented 337.2 billion euros ($411 billion) in June, the Bank of Spain said.
Spanish banks' debts to the ECB have racked up record highs each month of this year as they struggle to raise money on wary interbank and debt markets.
In April last year, Spanish banks' borrowings from the central bank amounted to just 42.2 billion euros.
Borrowings from the ECB really took off when the insitutution launched two highly disputed operations in December and February, offering a combined 1.1 trillion euros at ultra-low rates to banks.
The ECB's aim was to avert a looming credit crunch, hoping banks would lend the cheap funds to businesses and households and keep credit flowing in the debt-wracked eurozone economy.
However, ECB data this week suggested the banks were instead taking the money from the ECB and giving it straight back to the ultra-safe institution, fearful of lending it to riskier borrowers.
Few investors are prepared to lend to Spanish banks, now paying the price of heavily over-extending themselves during a property bubble that imploded in 2008.
Spain's eurozone partners have agreed to extend a rescue loan of up to 100 billion euros to salvage the nation's banks, with conditions that will include reckoning with the plunging value of banks' property assets.
The money will come at first from the eurozone's temporary bailout fund, the European Financial Stability Facility (EFSF), and then from the incoming European Stability Mechanism, expected to be up and running soon.
EFSF documents released by the Netherlands showed that by current estimates of Spanish banks'capital needs, the rescue loan would be disbursed in three main tranches:
-- An estimated 45 billion euros in mid-November, accounting for 60 percent of total recapitalisation needs;
-- An estimated 15 billion euros at the end of December, for viable banks unable to raise private equity without state help and for the "resolution" of non-viable banks;
-- An estimated 15 billion euros at the end of June 2013 for banks with capital shortfalls that have fewer problems raising private capital.
Finally, there will also be an as-yet undetermined payment of up to 25 billion euros in November this year to set up a so-called bad bank that would take in the Spanish banks' bad loans.
The EFSF is to make a first 30-billion-euro payment by the end of this month but that money is simply an emergency reserve, of which 20 billion euros will eventually be diverted into the mid-November payment and 10 billion euros will be kept back as a protective cushion.
On the debt market, investors demanded yields of more than 6.6 percent for Spanish 10-year government bonds in early afternoon trade, a level Madrid has admitted is unsustainable over the long term.
Last month, the ECB said it would widen the range of securities it accepts from eurozone banks in exchange for its loans in a move to boost lending to firms and households.
In a move that helped Spanish banks in particular, the ECB said June 22 that it would accept residential mortgage-backed securities as collateral for loans.
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