Source : The Business Times, August 13, 2007
FRANKFURT - The European Central Bank (ECB) on Monday pumped another 47.66 billion euros (US$65.06 billion) into the money market to address liquidity shortages amid growing fears about the US home loan sector.
The bank said earlier that the eurozone banking market was returning to normal after it injected a record 155.85 billion euros into the market over two days last week.
'The ECB notes that money market conditions are normalising and that the supply of aggregate liquidity is ample,' it said in a statement.
The bank, which sets monetary policy in France, Germany, Italy and the 10 other nations that use the euro, said the new injection would be lent to banks at a minimum interest rate of 4.0 per cent.
'With this fine-tuning operation, the ECB is further supporting the normalisation of conditions in the money market,' it said.
The cash injections by the Frankfurt-based ECB, which enable commercial banks to borrow from the central bank to meet their liquidity needs, are designed to forestall a credit freeze linked to problems in the US sub-prime, or high-risk, mortgage market.
Sub-prime loans are offered to Americans who have a poor credit rating and might otherwise be denied mortgages.
The current crisis stems from concerns that banks exposed to losses in the sub-prime market might have insufficient cash to continue lending normally, causing a credit crunch. -- AFP
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