The European Central Bank's 489 billion euro injection of ultra-long-term funds has seen the amount of excess liquidity in the banking system balloon to record levels and is putting heavy downward pressure on the rates European banks charge each other in open markets. With banks awash with long-term funds, they took 116 billion euros in one-week funds at an ECB refinancing operation on Tuesday, 16 billion less than the previous week and slightly under the 120 billion forecast in a Reuters poll. London interbank offered rates for three-month euros fixed at an almost one-year low of 1.03971 percent versus 1.04943 percent on Wednesday, having fallen some 30 basis points since late December. 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 on Thursday to 1.108 percent from 1.115 percent, hitting the lowest level since early March of last year. One-week rates - most heavily influenced by excess liquidity, now at 486 billion euros according to Reuters calculations - fell to 0.391 percent from 0.396 percent. Overnight rates also inched down to 0.363 percent from 0.380 percent the previous day. Dollar-denominated three month Libor dipped for a tenth straight day to 0.5306 percent, the lowest since early December and off the 18-month high of 0.5825 percent hit in early January. "The end-of-year explosive increase in the ECB's balance sheet signals that European-style quantitative easing is in full bloom," said Francis Scotland, director of global macro research at Brandywine Global Investment Management in Philadelphia. "These measures and others which might follow have the potential to at least kick the can a long way down the road if not support a prolonged process of rehabilitation." While it is still not clear whether the money from December's three-year ECB loan operation is filtering through to companies and consumers, ECB President Mario Draghi said last week that the move had avoided "a major, major credit crunch". Data last week showed that before the ECB three-year loans were taken, lending to euro zone companies fell at the fastest pace on record in December. On Wednesday the ECB survey of banks showed a major tightening of banks' lending rules was expected in the coming months while demand for loans was expected to plunge. "The latest ECB bank lending survey makes for depressing reading, with a tightening of lending standards across the board, and to a greater extent than banks expected in the previous survey," said Natascha Gewaltig, director of European economics for Action Economics in London. "The ECB has stepped up its liquidity measures to help alleviate the problem, but it remains to be seen if that will be sufficient to prevent a credit crunch that could severely affect the recovery," she said. The ECB will offer another round of three-year loans on Feb. 29. Draghi and other policymakers have said they again expect "substantial demand", meaning market rates are expected to come under renewed downward pressure in the coming months. Some money market experts also believe the bank may hold at least one more three-year operation after that. Interbank money markets, often the source of lending to the wider economy, remain dysfunctional as a result of the euro zone debt crisis. While short-term lending has improved in recent weeks, 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 486 billion euros.