"It appears that a very large majority of the large financial institutions" in Europe took advantage of the three-year loans at 1 percent interest the ECB announced Tuesday, said Laurence Mutkin, head of European interest-rate strategy at Morgan Stanley.
While slightly over $639 billion was loaned out, analyst said much of the funding went to pay off previous ECB obligations and that only about $270 billion represented new capital for European banks, The Wall Street Journal reported.
"I don't think you can say it's a game-changer … but it sort of slows down the vicious circle," said John Raymond, an analyst with CreditSights in London.
"It's much better to have this funding locked in rather than praying the market reopens."
French President Nicolas Sarkozy and others have expressed their desire that banks use the funding to purchase government bonds, especially in Spain and Italy, where bond yields have soared in recent months.
An auction of $7 billion of bonds saw borrowing costs plummet in Spain Tuesday with yields falling to 1.7 percent. A month ago, yields were at 5.1 percent.
Analyst said small banks snapped up the bonds to use as collateral for ECB loans.
Other analysts said European banks would use the money to pay off some of the $913 billion of their own debt that is scheduled to mature in 2012.
About $260 billion will be needed for banks to pay off maturing debt in the first quarter of the year, the Journal reported.
"This operation is not going to cover all the maturities," said Nick Matthews, a Royal Bank of Scotland economist.