More than a dozen Italian banks, including top lenders UniCredit and Intesa Sanpaolo, tapped 116 billion euros ($143.52 billion) of new three-year loans offered by the European Central Bank, nearly a quarter of the total, three sources with direct knowledge of the matter told Reuters.
The ECB's first ever offer of three-year loans on Wednesday drew demand for a massive 489 billion euros from 523 banks, raising hopes a credit crunch can be avoided and that the money could be used to buy Italian and Spanish bonds.
It's a 116 billion euros, one senior banking source told Reuters. Two other sources confirmed that amount.
The Italian figure includes 40.4 billion euros of state-backed bank bonds which were used as collateral for the loans. But banks could also offer other types of collateral for the ECB loans, such as government bonds for example.
A document from Italy's stock exchange Borsa Italiana showed 14 banks had listed state-guaranteed bank bonds on the MOT regulated bond market, a pre-requisite for those bonds to be accepted as collateral for the ECB new loans.
The biggest amount, 12 billion euros, of state-backed bonds was taken up by Intesa Sanpaolo, which confirmed it had used them as collateral for the loans, and said that these would help it complete pre-funding for its wholesale medium and long term maturities for 2012.
The stock exchange document showed Banca Monte dei Paschi di Siena has listed bonds for 10 billion euros, while UniCredit has floated 7.5 billion euros of bonds.
Among the other 14 banks are Banco Popolare with bonds worth 3 billion euros, Banca Popolare di Sondrio, Banca Etruria, Banca Popolare dell'Emilia Romagna and Credito Emiliano.
HELPING THE REAL ECONOMY
UniCredit and the Italian banking association poured cold water on the idea that the fresh and cheap ECB liquidity would prompt banks to buy more government debt.
I am convinced that liquidity should support the real economy and thus avoid a credit crunch, UniCredit CEO Federico Ghizzoni said in a radio interview on Wednesday.
Banking lobby ABI, which has strongly criticized the European Banking Authority for forcing Italian banks to mark-to-market their domestic government bond holdings, was scathing.
The EBA rules are a deterrent for buying sovereign bonds, so not even the ECB's important liquidity injection -- of almost 500 billion euros -- can be used to support sovereign debt, ABI director general Giovanni Sabatini told reporters.
The EBA created this problem: the new toxic assets are sovereign bonds, in the eyes of the market. Banks not only will not increase their exposure, but they will probably cut it, and this creates a potential problem for refinancing sovereign debt.
Italian banks have 192 billion of domestic government bonds on their books, of which 160 billion euros are spread among the five top lenders. They have substantially increased their reliance on the ECB for borrowing since July, as Italy got sucked ever deeper in the euro zone debt crisis and their access to wholesale debt markets froze.
In November, ECB funding for Italian banks rose to 153 billion euros from 111 billion euros a month before. In June it stood at just 41 billion euros.
(Additional reporting by Gabriella Bruschi; Writing by Silvia Aloisi; Editing by Jodie Ginsberg and Jane Merriman)