The ECB said it gave the loans to 523 banks, demonstrating that many of Europe's lenders expect to find it tough to borrow from other banks and money markets in 2012.
The demand for €489bn of three-year loans was well above the €310bn expected by traders polled by Reuters in the run-up to the operation.
The euro rose to a one-week high versus the dollar and European shares rose as the strong take-up boosted investors' appetite for risk.
The three-year loans, the longest maturity ever offered by the ECB, are the eurozone central bank's latest attempt to ease the region's debt crisis.
The ECB hopes the limit-free, ultra-cheap and ultra-long funding will bolster confidence in banks, ease the threat of a credit crunch and encourage banks to buy Italian and Spanish government debt, thereby pushing down the countries' borrowing costs.
“While this doesn’t fix the long-term structural issues in the EU, it may ensure a rally for risky assets into the new year,” said Jeremy Cook, chief economist at foreign exchange firm World First.
"It looks like Christmas has come early for the European banking sector - however, in the place of Santa Claus, with his big white beard and jolly smile, the benefactor looked a lot like Mario Draghi."
Rather than a simple flat rate, the three-year loans were offered at an interest rate which will be the average of ECB's main interest rate over the next three years.
That benchmark rate is, after a rate cut earlier this month, currently at a record low of 1pc.
For some banks, the money could be more than 3 percentage points cheaper than they can get on the open market.
As part of the deal, they can switch money borrowed from the ECB in October into three-year funding and will also be able to pay it back after just a year if they wish.
Today, banks switched €45.7bn out of one-year loans taken from the ECB.
The impact on overall liquidity levels was also softened after banks scaled down their three-month borrowing from the ECB to €30bn from €140bn and almost halved their intake of one-week loans this week.
Europe's banks are now more reliant than ever on central bank funds.
French banks have almost quadrupled their intake of ECB money since June to €150bn, while banks in Italy and Spain are each taking more than €100bn.
Earlier this week, the ECB said in its semi-annual Financial Stability Review that this dependency could be difficult to cure.
However ECB President Mario Draghi has been pressing banks to take the money since announcing the plans earlier this month.
He warned of a chance of a credit crunch on Monday and said that eurozone bond market pressure could rise to unprecedented levels early next year.
The Telegraph
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