August 10, 2007	Friday	Rajab 25, 1428

FRANKFURT, Aug 9: The European Central Bank made record cash injection into the eurozone banking market on Thursday to help lenders shaken by the US sub-prime mortgage crisis.

The amount loaned -- 94.8 billion euros ($130.2 billion) -- was more than the bank pumped in after the September 11, 2001 attacks rattled world financial markets.

The ECB, which sets monetary policy in the 13-nation eurozone, said 49 banks took up all of the funds offered at a rate of 4 per cent to offset a liquidity shortage in the money market.

“The ECB notes that there are tensions in the euro money market notwithstanding the normal supply of aggregate euro liquidity,” it said in a statement.

Analyst Mike Larson of Weiss Research said there were signs emerging that the crisis in the US sub-prime mortgage sector was spilling into other areas of the global economy.

“This is serious stuff. It's a sign that liquidity is seizing up amid fears of sub-prime mortgage contagion,” he said.

The intervention by the ECB spooked stock market investors, who are already worried about the impact of the US credit crisis on the world economy, and shares in Europe and the United States traded sharply lower.

US banks have suffered a sharp rise in defaults on high-risk, or sub-prime, mortgages and it is feared that losses by other banks and investment funds that are exposed to the US housing market could cause broad financial problems.

US President George W. Bush tried to calm the waters, saying there was “enough liquidity” to allow a correction on global markets in a press conference in Washington.

The ECB's quick move drew widespread approval from analysts.

“In my view, this is outstanding central banking by the ECB and ought to provide a lot of comfort to the market,” said Goldman Sachs's chief European economist, Erik Nielsen.

Analyst Aurelio Macario at Unicredit said the central bank had helped ease immediate fears in the sector.

“The ECB's swift reaction shows this is a proper work of a central bank and so now things have calmed down, at least for the moment. It was a panicky market today,” he added.

The ECB's move came after BNP Paribas, France's biggest bank, said it had suspended three of its funds that were exposed to the US mortgage crisis.BNP Paribas Investment Partners, a unit of the French bank, said the funds -- Parvest Dynamic ABS, BNP Paribas ABS Euribor and BNP Paribas ABS Eonia -- will accept no redemptions or subscriptions until further notice, the bank said.

There were also rumours on the market that German bank WestLB was facing liquidity problems.—AFP