Eurosystem gross lending to banks rose by a further €28.9 billion in the week to last Friday, bringing the increase since late May to €78.6 billion or 5.8%, according to weekly balance sheet figures released yesterday – see chart. (The gross figure comprises “lending related to monetary policy operations” and “other claims”, under which the Greek and Irish “emergency liquidity assistance” (ELA) operations are recorded.)
The rise probably reflects additional borrowing by banks in the periphery to offset continued deposit outflows and finance lending to national governments. The latter is suggested by a large increase in general government deposits at the ECB last week and may explain the recent “successful” Spanish government bond auction.
The implication is that TARGET2 imbalances have increased substantially further in June.
A further lending rise is likely this week, since a total of €206.7 billion has been allotted in weekly and three-month refinancing operations versus a maturing €192.4 billion.