The European Central Bank's tidal wave of cash has seen the amount of excess liquidity in the banking system balloon to record levels and is putting heavy downward pressure on the rates banks charge each other in open markets. Three-month Euribor rates, traditionally the main gauge of unsecured interbank euro lending and a mix of interest rate expectations and banks' appetite for lending, fell to 1.131 percent from 1.138 percent, the lowest since the beginning of March last year. Longer-term rates also dropped. Six-month rates fell to 1.425 percent from 1.433 percent, while 12-month rates dropped to 1.762 percent from 1.768 percent. One-week rates - most heavily influenced by excess liquidity - fell to 0.404 percent from 0.410 percent. Overnight rates inched up on Friday to 0.379 percent from 0.377 percent the previous day. While it is still not clear whether the money from last month's 3-year loan operation was filtering through to companies and consumers, ECB President Draghi said on Friday that the move had avoided "a major, major credit crunch". Data showed on Friday that loans to euro zone companies fell at the fastest pace on record in December. This was mainly before the ECB's 3-year loans took effect. The ECB will offer another round of ultra-cheap 3-year loans on February 29. Draghi and others have said they again expect "substantial demand" meaning market rates are expected to come under renewed downward pressure in the coming months. Some economists and money market experts also believe the bank may hold at least one more 3-year operation after that. One factor that may slow the drop in market rates, however, is that ECB policymakers appear to be hinting that the bank has cut interest rates far enough for now. ECB governing council member Yves Mersch said in an interview with German newspaper Sueddeutsche Zeitung over the weekend that the usefulness of additional rate cuts was limited in the current environment and could even do damage longer term. Interbank money markets, often the source of lending to the wider economy, remain dysfunctional as a result of the ongoing euro zone debt crisis. While short-term lending has improved in recent weeks, money market traders say banks remain reluctant to lend to peers for longer than a month. With high amounts of excess liquidity in the system, banks are currently depositing much of the extra cash back at the ECB. Overnight deposits at the ECB hit a record high of 528 billion euros at the peak of the ECB's last reserves period and currently stand at a still-hefty 489 billion euros. Short-term market rates are well below the main policy rate due to the excess cash, and the overnight deposit rate at 0.25 percent serves as a floor for money markets. Euribor rates are fixed daily by the Banking Federation of the European Union (FBE) shortly after 1000 GMT.