DowJones reports that ECB overnight deposits surged 63% Thursday, to €776.941 billion ($1.034 trillion) from €475.219 Wednesday.
So the ECB issues €700billion in loans to European banks, who turn around and deposit the loans en masse right back into the ECB. Well, technically it's not a circle-jerk as the funds originated from the Fed rather than the ECB.
Banks’ overnight deposits with the European Central Bank surged 63% on Thursday, shattering the previous record high, indicating an extremely elevated level of liquidity in the banking system after the ECB’s second three-year loan operation. The level of ECB deposits rose to €776.941 billion ($1.034 trillion) from €475.219 billion the day before, far exceeding the previous record high of €528.184 billion reached Jan. 17 in the wake of the ECB’s first three-year loan.
Meanwhile, banks borrowed just €572 million from the ECB overnight Wednesday, the lowest level since September and down from €2.963 billion Tuesday.
The overnight deposit level has been elevated since August 2011 as banks use the ECB to hoard excess cash instead of lending money to one another amid fears over their counterparties’ exposure to risky euro-zone sovereign debt.
But the daily amount deposited with the ECB jumped further after banks tapped the ECB for €489 billion at its first-ever three-year loan operation in December.