Banks including Barclays, Lloyds and Credit Agricole will use funds they borrowed from the ECB’s three-year liquidity operation to prop up subsidiaries in the economies of the eurozone periphery, the WSJ reports. Barclays’ Spanish and Portuguese units tapped funding in the February LTRO, while Credit Agricole partly borrowed through its Greek offshoot. In getting subsidiaries to fund from the ECB in this way, parent banks will be able to limit exposure to the units if the local economies falter, or even leave the euro altogether. Meanwhile, there are fears that banks will use LTRO cash to redeem so much bank debt in the next year that corporate debt markets could sharply contract, says the FT. Read more

Eight hundred European banks borrowed €529.5bn in three-year liquidity from the European Central Bank in the last LTRO, the FT reports. More than half of the banks tapping funds came from Germany, according to people familiar with the auction. But Italian lenders also took down €130bn of funds in return for collateral, with Spanish borrowing also likely to be heavy, Reuters says. FT Alphaville has a list of individual lenders who revealed their involvement, and the amount borrowed. The ECB is apt to watch for whether the funds are used to lend to the real economy or to refinance bank debts. Read more