FRANKFURT: Banks will return early 1.124 billion euros ($1.45 billion) of crisis loans to the European Central Bank next week after the ECB cut the cost of borrowing to a fresh record low of 0.5 per cent earlier this month. ECB President Mario Draghi said after the May policy meeting that the ECB is ready to cut interest rates further if the economy deteriorates, including the deposit rate now at zero, which would mean charging banks to hold their money overnight. Since then economic data painted a gloomy picture of the recession-stricken economy. Eurostat said the euro zone wallowed in recession for a sixth straight quarter at the start of this year and economists do not expect growth until next year. The ECB also decided at its May meeting to extend its provision of unlimited funds to banks, saying it would prime them with as much liquidity as they need until at least July 2014. This gives banks more funding assurance. Banks took over 1 trillion euros in 3-year money from the ECB in two long-term refinancing operations (LTROs) in December 2011 and February 2012, of which the first matures in January 2015. Banks now have the option to repay the loans early and on Friday, the ECB said 4 banks would repay 1.02 billion euros from the first LTRO on May 22 and 3 banks 104.3 million euros from the second. A US poll of euro money market traders had expected banks to return a total of 4 billion euros next week.

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