Spanish Crisis Continues: Banks Relying Very Heavily on ECB Money

Spanish banks continue to show signs of deep trouble. They borrowed US $180 billion from the European Central Bank in July, just under a third of the overall amount lent by the ECB.

Reuters reports: "Spanish banks had tapped the facility for 90 billion euros in April before interbank markets gummed up on fears other euro zone periphery countries could face debt crises along the lines of Greece.

A source said ECB borrowing by Spanish banks eased in the last week of July, after the results of stress tests on European banks were published. Spain's lenders came through better than feared even though five of the country's smaller banks failed.
August data would likely show less reliance on the ECB, the source said.
But Carlos Peixoto, bank analyst at BPI, said that data were unlikely to turn around in August given money market conditions had worsened in recent days.

"It's already discounted that in August, banks will still be accessing ECB funding," he said.
"Everyone is now looking toward September and October to see if the markets open to the smaller Spanish banks and there is investor appetite for their debt."