Spanish Banks’ ECB Loans Leap to Record Amid Bailout: Economy

Spanish lenders’ net borrowings from the European Central Bank jumped to a record 337 billion euros ($411 billion) in June as the European bailout agreement failed to ease their access to funding. Net average ECB borrowings climbed from 288 billion euros in May, the Bank of Spain in Madrid said today. Gross borrowing was 365 billion euros, up from 325 billion euros in May, accounting for 30 percent of borrowing in the euro region. Spain asked for as much as 100 billion euros of European loans to bail out its banks on June 9 as the government’s access to financial markets narrowed and its bond yields rose to about 7 percent. Banks’ increased dependence on the ECB may reflect deposit flight from Spain, which is suffering the biggest slump in foreign investment since the start of the euro. “The fear is that this was triggered by a further deposit outflow,” said Tobias Blattner, a European economist at Daiwa Capital Markets in London. “It’s a very large sum.” Residents’ deposits fell 2.5 percent in April from March, according to Bank of Spain data, declining 5.4 percent from the same month a year ago. Non-residents withdrew 24.6 billion euros of stock and bond investments in April, the most since at least 1999, and compared with 4.54 billion euros a year ago, the regulator’s data show.