Draghi: ECB bank loans averted ‘major funding crisis’

The European Central Bank’s new round of loans to banks has averted a major credit crunch but credit remains seriously impaired in parts of the euro area, ECB president Mario Draghi said at the World Economic Forum in Davos yesterday.

He also said the risk premium on eurozone government bonds was likely to remain high for an extended period, despite budget deficit cuts, economic reforms and moves to strengthen Europe’s fiscal discipline and financial firewalls.

Draghi said it was not yet clear whether the nearly €500 billion the ECB pumped into the banking sector in a cheap three-year liquidity operation was filtering through to companies and consumers.