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Wednesday, December 21, 2011

Banks Rush For Cheap Loans

Once it was just the hapless individual seeking a personal loan or mortgage who would rush for "cheap" loans.

Now the boot is on the other foot, as banks have been falling over themselves scrambling for the "cheap" three year loan deal offered by the ECB. Rates will be an average of the ECB rate over the next three years.

The ECB has loaned Euro489BN to 523 banks, significantly above the Euro310BN expected by the markets.

This of course has given the markets a temporary pre Christmas "pick me up". However, it does not cure the systemic failings of the Eurozone. The money will be used by banks to buy up sovereign debt and shore up their own finances; it will not be used to lend to companies or individuals in the wider economy.

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