Commercial banks parked almost half a trillion euros at the European Central Bank, the highest on record, as the mix of debt crisis worries and a recent giant injection of ECB cash left banks awash with money but too scared to lend it.
Overnight deposits at the ECB have regularly hit new records in recent weeks after the central bank's first ever offering of three-year loans pumped 490 billion euros ($620 billion) into the banking system.
ECB data on Monday showed overnight deposits reached a new high of 493 billion euros, up from the 490 billion they had risen to on Friday.
The total could climb further still. The end of the ECB's monthly reserves cycle - the point when banks have fulfilled their ECB targets and have few options to juggle their funding - is on Tuesday.
Changes to the ECB's reserves rules, which kick in on Wednesday and will mean banks have to keep less of a cash buffer at the ECB, are raising questions about future deposit levels.
The move will cut banks' reserves ratio requirements to 1 percent from 2 percent and is set to save banks 100 billion euros according to the ECB.
On one hand that could mean banks - who won't be able to repay old ECB loans early - may have even more spare cash to deposit. Alternatively, the impact may be minimal if banks react by cutting back on what they take at the ECB's once-a-week, 7-day funding handouts.
With total ECB lending at 664 billion euros, banks are now storing over 70 percent of money lent by the ECB at the central bank, compared to around a third after the collapse of Lehman Brothers back in late 2008.
For a package of graphics on the ECB, click on: http://link.reuters.com/neg32s
The rise in the headline deposit number was largely expected by money market experts considering banks' huge uptake of the three-year funding. While banks deposited less than 300 billion euros at the ECB at the peak of the last two reserve maintenance periods, the proportion - at over 65 percent - was not much lower than it is as now.
This deep reluctance of banks to lend to one another continues to paralyze money markets and highlights the barriers to achieving any substantial relief in the euro debt crisis.
Before the financial crisis started banks made scant use of the deposit facility, giving the ECB less than 100 million euros on most days.
Last week ECB President Mario Draghi said the ECB's three-year loans were clearly having a beneficial impact and were finding their way into the real economy as well as helping to calm government and bank bond markets.
While yields fell sharply at Spanish bond auctions last week, the success was not replicated at Italy's sale of three-year debt on Friday and S&P's downgrade of nine euro zone countries has cast fresh clouds.
($1 = 0.7895 euros)
(Reporting by Marc Jones; Editing by Ruth Pitchford)