Reply #46: CREDIT WRAPUP 1-(European) Banks scramble for cash...

[Ghost Dog]

http://www.reuters.com/article/marketsNews/idINL287615620071128?rpc=611&pageNumber=1&virtualBrandChannel=0

LONDON, Nov 28 (Reuters) - Banks scrambled for cash on Wednesday to cover their funding needs as a year-end credit squeeze intensified and the European Central Bank stepped in to lend three-month funds at its highest rate in 6-1/2 years.

The ECB lent banks 50 billion euros ($73.7 billion) -- less than half the amount they bid for -- to tide them over the New Year period. The banks paid an average 4.70 percent, way over the ECB's policy rate of 4.0 percent and the highest since April 2001, when its policy rate was 4.75 percent.

It still wasn't enough. "We didn't see any effect on markets after the (auction result) announcement. The amount they're needing is a lot more than the ECB is allotting," said a euro zone money market trader.

...

Shares in Switzerland-based bank UBS AG (UBSN.VX: Quote, Profile, Research) jumped on hopes that profitability would improve after its third-quarter loss, and that fresh money from Asian, Gulf and Russia could target banks hurt by the crisis after Abu Dhabi gave Citigroup Inc (C.N: Quote, Profile, Research) a $7.5 billion capital injection on Tuesday.

...

"The level of confidence remains quite low. Banks are still reluctant to lend because of counterparty risk and balance sheet constraints on their own side," said Nathalie Fillet, senior fixed income strategist at BNP Paribas.

Meanwhile Norwegian bank Terra Gruppen shut its brokerage arm and sacked its chief executive on Wednesday due to a furore over structured investments put together by Citigroup that Terra sold to four Norwegian municipalities before the summer credit crunch.

The investments were based on debt issued by U.S. cities and states with high credit ratings. However, the municipalities leveraged their investments with short-term loans, which became costly when financial market liquidity dried up in August.

/...