ECB lends $3.7 bn to European banks

The European Central Bank said it will lend $3.7 billion for seven days to euro area banks to ease tensions in money markets.

The Frankfurt-based central bank said it will provide the funds tomorrow to 11 banks at a fixed rate of 0.63 per cent. Last week, banks borrowed $4.1 billion in seven-day funds. The ECB doesn’t disclose the identity of the banks it lends to. Demand for dollars from European banks surged in December after the ECB coordinated with the Federal Reserve to halve the cost of borrowing in the currency, as part of a global effort to mitigate a credit shortage worsened by the euro region’s sovereign debt crisis.

European banks need dollars to fund their own lending in the US as well as to clients elsewhere doing business in the world’s largest reserve currency.