THE EUROPEAN Central Bank has said it will lend banks €29.4 billion for six days to help ease the expiry of €225 billion in longer-term loans.

Banks yesterday needed to repay €75 billion in 12-month funds, €18 billion in six-month funds and €132 billion in three-month loans. The 12- and six-month loans won’t be renewed as the ECB phases out the non-standard measures used to fight the financial crisis.

In a three-month loan offered by the ECB on Wednesday, banks asked for €104 billion, which was less than some analysts expected. The loans are offered at the ECBs benchmark rate of 1 percent.

The six-day cash “will tide the banks over to the next ECB main refinancing operation next week,” said Carsten Brzeski, an economist at ING Group in Brussels. “The ECB doesn’t want to leave them high and dry but it will be watching this very closely to assess the health of the banking system.”

The ECB said it was concerned that some banks in the European Union remain overly reliant on central bank cash. Governing council member Ewald Nowotny said last month that addiction to ECB liquidity is “a problem” that “needs to be tackled”.

The Frankfurt-based ECB said 50 banks asked for the six-day funds at 1 per cent. Banks can currently borrow one-week money from each other in the market at about 0.52 percent. While the ECB is still lending banks as much cash as they need against eligible collateral, the duration of the loans is shortening.

The ECB started to phase out its longer-term loans last year. Greece's debt crisis, which sparked a bond-market rout, forced a rethink. – (Bloomberg)