Overnight deposit rates reflect missing confidence, says Cheviot’s Miller

Record high overnight deposits reported by the European Central Bank (ECB) are no surprise given the serious lack of confidence in the banking sector, says Cheviot Asset Management’s David Miller.

The ECB has reported two consecutive days of record high overnight deposits made by European banks, as the figure climbed to €452 billion (£377 billion) on Tuesday.

The record of €384 billion, recorded in June 2010, was originally broken on Monday when €411 billion was deposited as banks continued to favour this comparatively safe haven over lending to one another.

“The take-up of ECB liquidity last week showed just how serious the lack of confidence in eurozone banks is,” says Miller, a partner at Cheviot.

“However, next year I’d expect to see an injection of QE [quantitative easing] into the eurozone, along with lower interest rates, and a sustained effort by all concerned to create stability,” he says. “These measures would help to soothe the nerves of banks and investors.”

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