By Simon Miller

Nearly 300 more banks have taken advantage of the European Central Bank’s (ECB) second cheap three-year funds than the initial offering.

In December, 523 banks took advantage of the ECB’s long-term refinancing operation (LTRO) borrowing €489bn while this morning saw 800 banks take €530bn in the second tranche.

The initial loans were used to to cover maturing debt and ECB president Mario Draghi has urged banks to use the new loans to lend to households and companies to help strengthen economic growth.

Bank officials are also hoping that the banks would use the new money to aggressively buy higher-yield bonds such as Italy’s.

The ECB data includes funds rolled from shorter dated operations resulting in around €445bn of net new liquidity compared with €193.4bn added in December’s LTRO.

David Thebault at Global Equities told Reuters: “This removes the systemic risk. The figure is not big enough to spark fears about the health of the peripheral, while at the same time it fuels hopes that it will help the economic recovery. Now the focus will turn to the ECB's overnight deposit facility. If the number falls, it means the money is being put at work. I'm staying 'long' euro zone equities, although I'll start buying put spreads soon to get protection against a possible short-term pull-back.”

European markets have reacted positively to the news with the Euro Stoxx 50 up 14.25 points at 2,533.97 and the CAC 40 up 15.29 at 3,469.28. The FTSE100 was up 2.90 points at 5,930.43 (11.02GMT).

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