European Banks Use Cheap Loans To Cut Risk

A number of large European banks have borrowed billions of dollars in cheap loans from the European Central Bank in order to protect themselves from financial problems that may arise on the faltering continent, according to The Wall Street Journal.

Under a three-year-loan program, a number of banks, among them Barclays, Lloyds Banking Group, and KBC Group, have borrowed billions in loans through their subsidiaries in Spain, Portugal, Greece, and Ireland.

Bank officials and experts told The Wall Street Journal that the move was designed to limit their exposure to the subsidiaries, who are trying to wade through rough economic times in their host countries.

According to the report, the ECB has been handing out three-year loans in the hopes of averting a cash crunch as European banks were struggling to repay maturing debts.

The loans were offered with low 1% interest rates in December and again last week, according to The Wall Street Journal.

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