The European Central Bank held a conference call with commercial banks on Friday to gather opinion on the state of money markets in the wake of the Greek debt crisis, banking sources told Reuters.
The unplanned call, which lasted around 45 minutes, comes as the Greek crisis threatens to shut down money markets again.
The problems have fuelled speculation the ECB will reintroduce dollar lending and some of the longer-term loans it used to soothe markets after the collapse of Lehman Brothers in 2008 threatened to bring down the entire financial system.
"People have basically stopped lending to each other again. If Lehman was a 10 then this is a 7," said one money market trader who asked to remain anonymous.
One money market desk head on the call said the aim was for the ECB to gauge banks' view on the current problems, stressing it was not unusual for the ECB to hold such calls.
"The ECB was just listening and taking notes. There was no panic situation. The first thing they always say is we are only hear to listen to you, we can't make any comments," he said.
"They take up all that information they receive, get it together and then pass it to the board of the ECB."
The ECB declined to comment.
DOLLAR DEMANDS
The fear that Greece may default on its debt has reignited worries about the health of euro zone banks.
Banks have long stopped lending to their Greek counterparts due to the country's debt problems, but Portuguese and Spanish banks are now facing a similar lockout as spillover risk rises.
Interbank lending rates <EURIBOR=> have been steadily climbing as has the cost of insuring European banks against default. Money market traders were also alarmed last week when at least one bank was prepared to pay 1.5 percent — well over the 1.0 percent starting price– for ECB three-month funds. [ID:nLDE63R13RF]
"We need dollar liquidity. We need the euro/dollar facilities to come back in at decent levels," said another trader, who called for the ECB to inject euro liquidity at cheaper rates than the 1 percent it currently offers it at.
The source on the ECB's call expected its to restart its dollar lending operations, a combination of currency swaps and straight forward lending in U.S. dollars.
"It is a possibility for the U.S. Fed and the ECB to do this specific market measure in just a few hours because it is just re-installing something that was there before," he said.
ECB President Jean-Claude Trichet was asked about the possibility of such a move on Thursday. However, he gave little indication that it was on the cards. [ID:nLDE64525Y]
