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Foreign institutions seek safety in Germany as euro crisis simmers

Published 07/03/2017, 16:49
Updated 07/03/2017, 16:50
© Reuters. A sign is seen outside the headquarters Germany's federal bank Deutsche Bundesbank in Frankfurt

By Francesco Canepa

FRANKFURT (Reuters) - Foreign institutions are parking record amounts of money with Germany's central bank, data showed on Tuesday, suggesting they are looking for a safe haven for their euros at a time of growing unease with the bloc's banks and its future.

Growing anti-euro sentiment in France and the Netherlands before key elections and a simmering banking crisis in Italy have revived the spectre of a break up of the currency bloc, unnerving lenders and investors.

This is also starting to show in the behaviour of foreign governments, central banks and international organisations, which are increasingly choosing to deposit euros at the Bundesbank, seen as the bloc's safe haven thanks to Germany's good public finances.

The German central bank has seen its liabilities to customers outside the currency bloc rise from 16 billion euros in Jan 2016 to 94 billion euros on Feb. 2, 2017, the data showed, having set an all-time high at the end of December.

Neither the Bundesbank nor the European Central Bank provide commentary with the data but the need for a safe place to park billions of euros injected via the ECB's bond-buying programme was likely to have played a role.

Despite charging clients a higher rate than the ECB for storing their cash, the Bundesbank is taking in the lion's share of the new money being parked by foreign institutions with the Eurosystem of euro zone central banks.

The runner-up in this category, the Bank the France, had liabilities of just 25.8 billion euros (22.36 billion pounds) on Feb. 2, followed by the Netherlands with roughly half that amount.

© Reuters. A sign is seen outside the headquarters Germany's federal bank Deutsche Bundesbank in Frankfurt

The figures also include euros and debt denominated in the single currency posted as collateral by foreign organisations to borrow bonds held by the central banks. In the Bundesbank's case, this added up to just over 4 billion euros at the end of December.

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