REPORT: European Banks Would Need 4 More LTROs To Get Through 2013

Widely believed to have averted a full-scale banking crisis in Europe, the European Central Bank’s three-year long term refinancing operation has given a boost to markets jittery over the prospect of a European meltdown.

But let’s put this in perspective. While European banks’ purchases of sovereign debt as a result of the LTRO may have funded some countries through the end of the year, the banks themselves have a long way to go before they’ll be secure about their own funding next year.

In fact, according to this chart (via @ZeroHedge) banks would need a full four more LTROs before they would be sure to meet funding requirements by the end of next year. The €489 billion ($657 billion) they scooped up in the last LTRO is still paltry in comparison to banks’ €2.4 trillion in funding needs by the end of next year.

european banks funding needs 2013

Photo: @ZeroHedge

Obviously, banks will try to raise funding through other outlets. At minimum, however, this chart highlights that it’s still difficult to be secure that a credit crunch wouldn’t take down Europe’s banking system.

Tomorrow’s LTRO is expected to produce the same take-up as December’s. We could very well see a renewed pressures on the banking system if this allotment falls short.

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