BANKS will return 4.15 billion euros (US$5.56 billion) in long-term loans to the European Central Bank (ECB) this week after the ECB started to charge for holding banks’ excess cash overnight and promised more long-term loans.

    The amount that banks will repay Wednesday is more than last week’s crisis-loan repayments of 3.21 billion euros and exceeds the 3 billion forecast in a Reuters poll.

    The ECB cut interest rates to record lows in June — the deposit rate is now below zero — and took several steps to boost lending to eurozone companies. It also pledged to do more if needed to fight off the risk of Japan-like deflation.

    The measures include a new four-year loan program, with which the ECB hopes to encourage banks to boost their lending.

    Banks continue to repay LTRO funds they took from the ECB in late 2011 and early 2012 as they are going through ECB health checks, which are in their final stages now with a Europe-wide bank stress test.

    On Friday, the ECB said four banks would repay 2.32 billion euros from the first LTROs on Wednesday and six banks would pay back 1.83 billion from the second LTRO.

    (SD-Agencies)