Eurosystem gross lending to banks in euros rose by a further €8.5 billion last week, consistent with continued deposit flight from the periphery, necessitating increased borrowing from the ECB and national central banks. Lending has increased by €52.8 billion over the last five weeks (i.e. since 4 May).

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 latter component fell by €61.0 billion last week as a recapitalisation of Greek banks allowed them to switch from ELA into the weekly refinancing operation – lending under this operation surged by €68.2 billion.

“Lending related to monetary policy operations” will rise further this week since €150.7 billion has been drawn down in the weekly and one-month refinancing operations settling tomorrow versus a maturing total of €132.4 billion.

Greece and Spain probably account for the bulk of the €52.8 billion lending rise over the past five weeks. Calendar May figures show an increase in Banco de Espana lending to banks of €26.3 billion. Banca d’Italia lending, by contrast, was little changed – up by only €0.6 billion. The gap between the €52.8 billion system-wide rise over the past five weeks and the €26.3 billon Spanish increase in May suggests that Greek banks have suffered an outflow of up to €26 billion, equivalent to 6% of their total assets at the end of April and 15% of their domestic deposit base.

The increase in Eurosystem lending has been “financed” by the Bundesbank, whose net TARGET2 claims rose by €54.4 billion during May to €698.6 billion, equivalent to 27% of annual German GDP.