Friday, December 3, 2010

Europe banks used Fed to ease liquidity strains

LONDON (Reuters) - European banks said they used emergency help from the U.S. Federal Reserve to ease liquidity strains at the height of the financial crisis and have fully repaid loans, after data showed they were big beneficiaries.

Barclays (BARC.L), UBS (UBSN.VX), Royal Bank of Scotland (RBS.L), Dresdner Bank (CBKG.DE) and Dexia (DEXI.BR) were among the biggest users of the support, according to data released by the Federal Reserve late on Wednesday.

The data stoked some criticism in the United States at the scale of help provided to overseas firms following the bankruptcy of Lehman Brothers in September 2008.
Several European banks said the loans were available more cheaply than the market could provide and were paid back long before the facilities closed, but the data highlight how far they relied on the U.S. central bank during the crisis.

Barclays borrowed $47.9 billion under the Primary Dealer Credit Facility (PDCF), an overnight facility for broker-dealers, after its takeover of Lehman's U.S. operations.
Other sizeable users of PDCF included UBS and BNP Paribas (BNPP.PA).
The Fed facilities were used from the summer of 2007 to ease liquidity strains and provide credit. Adding up the raw data could overestimate how much banks needed, as loans were rolled over or repaid and subsequently borrowed again, bankers said.

Barclays was also a big user of the term auction facility (TAF), which aimed to provide funding for up to 84 days to financial firms and more commonly used by Europe's banks.
Barclays borrowed more than $200 billion during the course of the TAF facility and UK rivals RBS and Bank of Scotland, now part of Lloyds Banking Group (LLOY.L), tapped it for more than $150 billion.
France's Societe Generale (SOGN.PA) borrowed more than $100 billion from the facility, Dresdner tapped it for more than $90 billion, Dexia used more than $80 billion and UBS, Unicredit and Deutsche bank each tapped it for more than $50 billion.

The Fed said all users of the PDCF and TAF facilities had paid back the loans with interest.
Barclays said it paid back all the loans by the end of 2009.
RBS said: "Like most global banks, we utilized central bank liquidity schemes during the crisis in financial markets." RBS, which owns U.S. bank Citizens, had a 2.3 trillion pound balance sheet at the end of 2008 and has been shrinking since.

UBS said it had fully repaid the facility by June 2009. "We used them to diversify our funding sources, this was just one source of liquidity alongside others," the bank said.
BNP said it stopped using the facility in August 2009 and part of the reason it used TAF to "avoid exacerbating market strains further."

Japanese banks also borrowed from the Fed. U.S. banks including Citigroup (C.N), Morgan Stanley (MS.N) and Goldman Sachs (GS.N) were also big recipients of the Fed's key emergency lending programs, according to a Reuters analysis of Fed data.
(Reporting by Steve Slater; additional reporting by Martin Desapinto, Lionel Laurent and Philipp Halstrick. Editing by Jane Merriman)
www.reuters.com

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