ECB Balance Sheet Increases to a Record $3.55 Trillion on Loans to Banks

The European Central Bank’s balance sheet soared to a record 2.73 trillion euros ($3.55 trillion) after it lent financial institutions more money last week to keep credit flowing to the economy during the debt crisis. Lending to euro-area banks jumped 214 billion euros to 879 billion euros in the week ended Dec. 23, the Frankfurt-based ECB said in a statement.The balance sheet increased by 239 billion euros in the week and was 553 billion euros higher than three months ago.The euro weakened and stocks fell, halting a five-day advance in the Standard & Poor’s 500 Index. “The market reaction is slightly incomprehensible,” said Jens Kramer.After that record liquidity injection it would follow that the balance sheet would swell. Seeing the figure in black and white, and the fear of what would happen to the ECB if a country defaulted, may have spooked the market.”The ECB last week awarded 523 banks three-year loans totaling a record 489 billion euros to encourage lending to companies and households and prevent a credit shortage.Overnight deposits at the central bank increased to an all- time high of 452 billion euros yesterday.