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A Record 3 Trillion Euros Is Looking for a Home

(Bloomberg) — The European Central Bank’s emergency stimulus has propelled excess cash sloshing around the euro area’s economy past 3 trillion euros ($3.5 trillion) for the first time.

Financial institutions have increased the amount of money parked with the ECB by 1 trillion euros in under six months, according to the central bank’s latest liquidity update. It comes after policy makers issued cheap loans to banks and snapped up bonds to offset the economic damage from the coronavirus pandemic.

chart: Awash With Cash

© Bloomberg
Awash With Cash

Liquidity conditions became exceptionally loose when the ECB started charging interest rates as low as minus 1% for targeted longer-term refinancing operations, known as TLTROs, to aid the economic recovery from the pandemic. That means the central bank is effectively paying for the money to be lent out.


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Whether banks hoard the cash for a rainy day or lend it out to stimulate the

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