FRANKFURT - Banks increased their overnight borrowing from the European Central Bank at the turn of the year, while deposits dipped, ECB figures showed on Friday.

Banks borrowed 4.058 billion euros from the ECB's overnight loan facility as of Jan. 1, compared with 1.402 billion euros reported for Dec. 30 and the most borrowed for three weeks.

Bank also deposited 203.601 billion euros at the European Central Bank overnight, down from the 250.082 billion euros reported previously.

The amounts are well above levels when interbank lending markets are functioning properly and a sign that jittery banks are opting to hoard their cash rather than lend it on to each other.

Overnight loans currently charge an interest rate of 3.0 percent and deposits pay 2.0 percent, compared with the ECB's key interest rate of 2.5 percent.

However, from Jan. 21 the gap between the main rate and the overnight deposit and lending rates will increase from 50 basis points to 100 basis points.

It means that if the refi rate were left at 2.5 percent, the overnight deposit rate would drop to 1.5 percent and the overnight borrowing rate would rise to 3.5 percent. For details of previous ECB overnight lending operations please go to the ECB web site:
http: www.ecb.int/stats/monetary/res/html/index.en.html