Spanish banks' ECB borrowings on the rise

Spanish banks’ borrowings from the European Central Bank increased by the most in more than a year in November as Europe’s debt crisis limited other sources of financing.

The average amount borrowed in November rose to euro 98 billion ($128 billion), the highest since September 2010, from euro 76 billion in October, according to data published by the Bank of Spain on its website on Wednesday. It was the biggest monthly jump since June 2010 in absolute terms.

Spanish banks have struggled to raise funds from wholesale markets while competition to capture deposits from retail customers has increased, leading some to step up borrowing from the ECB. Caja de Ahorros del Mediterraneo, a lender that was seized by the Bank of Spain and then sold to Banco Sabadell SA (SAB) for one euro last week, has received euro 7.7 billion of ECB lending, Sabadell said on December 8.

The data released on Wednesday correspond to the month when Spain’s sovereign 10-year borrowing costs surged to a euro-era record of 6.78 per cent. Since November 17 that yield has dropped more than 1 percentage point, and was at 5.72 per cent on Wednesday.