* Banks borrow $2.8 bln from weekly auction
* Access to dollars at its tightest since 2012
* Bank sources cite new rules, Deutsche Bank worry
By Francesco Canepa and John O'Donnell
FRANKFURT, Oct 5 Euro zone banks borrowed $2.8
billion from the European Central Bank's emergency line on
Wednesday, one of the biggest weekly take-ups since the
financial crisis, as Deutsche Bank's woes and tighter U.S. rules
made market funding more difficult.
The nine banks were not identified and their reasons for
tapping relatively expensive ECB funding are unknown.
But sources at commercial banks said euro zone banks were
finding it harder to borrow dollars on the market because of new
U.S. rules prompting redemptions from money market funds, the
traditional reservoir of bank-to-bank lending.
A euro zone central bank source said difficulties at
Deutsche Bank, confidence in which has been shaken after it was
threatened with a U.S. fine of up to $14 billion, had also made
it harder for other euro zone banks to get dollar funding.
This meant banks were turning to the ECB instead, which
allows them to borrow as many dollars as they want -- provided
they have collateral -- using a swap line with the Federal
Reserve created during the financial crisis.
"There were a lot of dollar funding issues in the market for
European banks," the central bank source said.
One measure of how much it costs a euro zone
bank to borrow dollars for three months is now at its highest
since 2012, albeit still well off the peaks seen in that year
and at the height of the financial crisis in 2008.
Banks' use of the ECB's dollar auction, which is more
expensive than borrowing on the market, has declined over the
past three years as markets calmed and firms started lending to
each other again.
Most auctions since 2014 have received bids worth just tens
of millions of dollars while some had none at all, although last
week's auction saw a sudden jump in the amount borrowed to $6.35
billion, the highest since 2013.
Dealers said that number was probably inflated by the
quarter-end, when the availability of dollars on the market
shrinks as balance sheets are whittled down.
But this week's outsized take-up suggested a more
fundamental change in market conditions may be happening.
"This kind of stress in the system has been triggered by
individual banks in recent weeks," Rainer Guntermann, an analyst
at Commerzbank in Frankfurt, said.
"We had some noise out of Italy in recent weeks but in the
past week it is likely linked to these stories around Deutsche
(Additional reporting by John Geddie in London; Editing by