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Friday 02nd of July 2010
June 30, 2010    

Stock markets recover as euro zone banks borrow less than expected

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by Kay Murchie
Stock markets recover as euro zone banks borrow less than expected

Global stock markets were rocked yesterday with the news that euro zone banks may face funding difficulties after it was revealed that the European Central Bank (ECB) would not be offering 12-month loans.

A year ago, the ECB was forced to offer European banks 12-month loans at low interest rates to help them survive the financial crisis.

However, this was a longer repayment term than the traditional three to six months.

The euro fell on the news but has since recovered after euro zone banks borrowed less than feared.

The ECB will lend commercial banks €131.9 billion (£108 billion) for three months - less than the €150-200 billion the market had anticipated.

The news soothed concerns about liquidity among financial institutions.

Meanwhile, the EU has announced this week that it is to treble the number of banks that will undergo public stress tests.

The tests are intended to ease increasing anxiety over Europe’s finance sector.

Last year, almost two dozen banks were forced to take part but this will now include a further 60 to 120 banks.

The tests are due to be completed by mid-July.

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