Don't believe reports that the ECB is draining liquidity these days. A comparison of the weekly financial statement of the European Central Bank (ECB) from December 29, 2006, and from December 28, 2007, results in a hefty shock. The balance sheet grew by more than 30% from 1.15 to 1.5 trillion Euros within 12 months. Despite all the claims about a responsible monetary policy the ECB is further away from it than ever before.
But back to the ECB's balance sheet:
- Lending to banks rose by 41.4% from 450 to 637 billion Euros YOY.
- The black box of the ECB, so called "Other assets" zoomed more than 50% form 218 to 327 billion Euros.
As for European banks; don't lend them your money. When banks advertise 6% interest for the balances on checking accounts on business TV I am left with the question why they don't approach the ECB where they are supposed to get it for 4% or 5% at the discount window?