The ECB's overnight deposit rate, which it cut to zero on July 5, acts as a floor for money market rates as banks only lend to rival banks if they are able to earn a better rate of interest than at the central bank.
The ECB hopes its unprecedented move, which means banks now get nothing if they park their spare cash there, will nurture a return of more significant interbank lending by forcing banks to look for more profitable options.
Although some money market experts fear the cut could backfire and kill off parts of the market, the move, plus a growing belief the ECB could continue to cut rates, has had an immediate impact on bank-to-bank rates.
Three-month Euribor rates, traditionally the main gauge of unsecured bank-to-bank lending, hit a new all-time low of 0.451 percent from 0.458 percent.
Other key rates saw similar drops. Six-month Euribor rates fell to 0.735 percent from 0.743 percent. Shorter-term one week rates dipped to 0.113 percent from 0.115 percent while overnight rates ticked up to 0.120 percent from 0.119 percent.
Euribor rates, like counterpart Libor bank-to-bank rates, are currently at the center of a manipulation scandal after it emerged a number of banks were falsely submitting the Libor rates they pay.
Dollar-priced three-month bank-to-bank Euribor lending rates fixed lower at 0.912 percent from 0.919 percent, while overnight dollar rates were more-or-less flat at 0.339 percent.
The ECB's move to stop paying interest on banks' deposits saw almost half a trillion euros transferred from the ECB's deposit facility to banks' current accounts last week.
But with the monthly reserves cycle now in its stride and fewer options available for banks to juggle their funding, the money has started to stabilize.
A total of 357 billion euros was parked in the ECB's deposit facility overnight. Banks' current account deposits at the ECB dipped to 489 billion euros.
Euribor rates are fixed daily by the Banking Federation of the European Union (FBE) shortly after 5 a.m. EDT.
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