RBS took out £5bn loan from ECB; investors relieved, shares rise

It has emerged this morning that Royal Bank of Scotland (RBS), the part nationalised lender which is 84% owned by taxpayers, last month partook of the emergency funds offered by the European Central Bank through its long-term refinancing operations (LTRO).

The above can be gleaned from a recently published Morgan Stanley research note, The Telegraph reports.

The aim of the LTRO is to replace the financing which has dried up in wholesale funding markets and which many banks had become dependent upon. In the absence of such measures financial intermediaries would be forced to sell-off assets so as to meet heightened short-term obligations.

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Morgan Stanley analysts estimate that the lender borrowed a quarter of the £20bn of wholesale funding it has to replace in 2012.

No other British banks are known to have made use of the facility, although a number of European banks borrowed a total of £407bn (€489bn).

The newspaper adds that, "RBS's use of the LTRO facility is thought likely to be in relation to its Irish business where it has taken heavy losses."

It is in part precisely due to the above acute funding requirements that just yesterday the bank announced the $7.3bn sale of Aviation Capital, its aircraft-leasing business, to a Japanese financial group.

Italian lender Monte dei Paschi di Siena, another lender mentioned in that newspaper report, is also one of the biggest gainers today in Europe. Its shares are now advancing by 7.61% to €0.229.

As of 11:50am shares of Royal Bank of Scotland are leading on the top share index, moving up by 3.1% to 27.9p.

NR