ECB expects €61bn LTRO repayments The European Central Bank on Friday said that eurozone banks would pay back just €61.1bn of the amount borrowed last February as the window opens for early repayment of the second round of money offered under the ECB's cheap, three-year loan programme. Early repayment of money borrowed under the ECB's longer-term refinancing operations is seen as a key gauge of the strength of Europe's economic recovery. The amount announced on Friday is about half what analysts had expected, potentially pointing to a heightened level of caution ahead of crucial elections in Italy and Cyprus and political instability in Spain. Consensus estimates had expected about €130bn of a total €529bn borrowed by 800 banks last February to be returned to the ECB when the window officially opens for early repayment of the second tranche next Wednesday. The LTRO - which saw about €1tn pumped into the financial system in two operations in December 2011 and February 2012 - provided crucial funding to European banks that were facing a liquidity squeeze at the end of 2011 that policy makers feared could exacerbate problems in the eurozone. Hundreds of banks took advantage of the opportunity to borrow at a rate of just 0.75 per cent. But as conditions in the eurozone have eased following further ECB intervention last summer, those banks that have ready access to public debt markets have been keen to wean themselves off the central bank funding. Ahead of the announcement analysts at RBC Capital markets had suggested that the second LTRO could see fewer repayments given that the ECB's collateral rules were significantly loosened in between the two LTRO operations. "This implies that strong banks with better collateral used the first LTRO and potentially weaker banks with lower quality collateral used the second," they said. Banks were able to start repaying money borrowed in the December 2011 LTRO last month. The ECB does not reveal which banks are repaying each week. However, banks including Commerzbank, KBC, BNP Paribas, Societe Generale and Credit Agricole have indicated in recent weeks that they are already beginning to repay their loans. Spanish lenders including BBVA and Santander have also announced sizable early repayments. However, Italian lenders have been more cautious about announcing early repayments, with government elections looming and a crisis at Monte dei Paschi di Siena still playing out. Banks are able to pay back the money borrowed from the ECB every week until maturity. So far just over €150bn has been returned of the first LTRO - the majority of which was repaid on January 30. Initial market reaction saw the euro hit a six-month low of $1.3156 against the dollar, but it later recovered to $1.3181, flat on the session.