FRANKFURT - THE European Central Bank said on Tuesday that it had identified a large amount of excess cash in eurozone money markets and would seek to mop it up with what it calls a fine-tuning operation.

The ECB's forecasts 'show that a large positive liquidity imbalance is expected' on the last day of period during which commercial banks must maintain minimum reserves.

ECB to loan out 334b euros FRANKFURT - THE European Central Bank said on Tuesday that it would lend more than 334 billion euros (S$636.9 billion) during a regular weekly operation which underscored strong demand from eurozone banks. A total of 848 banks requested the funds, the first to be lent at the ECB's new benchmark rate of 3.25 per cent following a half percentage point interest rate cut on Thursday. ... more

The central bank would thus launch a call for the surplus to be deposited with it at variable rates of no more than 3.75 per cent. It said it would take in all the excess cash that banks wished to turn in.

Central banks have injected massive amounts of cash into interbank markets to encourage commercial banks to keep extending the credit on which business depends.

When it identifies a surplus, it withdraws cash to prevent an excessive supply from fuelling inflation.

Money markets determine the availability of credit for vast numbers of people around the globe, from managers trying to fund their businesses to families and students seeking mortgages and personal loans. -- AFP