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In reply to the discussion: STOCK MARKET WATCH -- Tuesday, 22 May 2012 [View all]Demeter
(85,373 posts)57. Secret Central Bank Aid Props Up Greek Banks
http://www.cnbc.com/id/47513542
There has been no official announcement. No terms or conditions have been disclosed. But Greeces banking system is being propped up by an estimated 100 billion or so of emergency liquidity provided by the countrys central bank approved secretly by the European Central Bank in Frankfurt. If Greece were to leave the eurozone, the immediate cause might be an ECB decision to pull the plug.
Extensive use of emergency liquidity assistance (ELA) to help banks in the weakest economies has been one of the less-noticed features of the eurozone crisis. Separate from normal supplies of liquidity and meant originally as a temporary facility for national authorities to use when banks hit problems, ELA proved a lifesaver for the financial system Ireland and is now even more so in Greece. As such, it has given the ECB which has ultimate control over the facility considerable power to determine countries fates.
Whether that power would ever be exercised is unclear. ELA is a subject on which the ECB is deeply reluctant to provide information even on where or when it is provided.
You dont say when you are in an emergency situation, because then you make the situation worse. So I really dont see the usefulness of being more transparent, Luc Coene, Belgiums central bank governor, explained in a Financial Times interview this month. The ECBs guard slipped a little late last month. Its weekly financial statement published on April 24, showed an unexpected 121 billion increase in the innocently titled heading other claims on euro area credit institutions, the result of putting all ELA under the same item. By definition, 121 billion was the minimum amount of ELA being provided by the eurosystem the network of eurozone central banks. By scouring ECB and national central bank statements, analysts have since pieced together more details. Analysts at Barclays, for instance, reckon Greece is now using 96 billion in ELA, with Ireland accounting for another 41 billion and Cyprus 4 billion. If correct, total ELA in use has exceeded 140 billion more than 10 per cent of the amount lent to eurozone banks in standard monetary policy operations. Because of the risks of extra liquidity creating inflation, ELA in excess of 500 million requires approval by the ECBs 23-strong governing council: its use can be stopped if two-thirds of the council oppose an application.
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There has been no official announcement. No terms or conditions have been disclosed. But Greeces banking system is being propped up by an estimated 100 billion or so of emergency liquidity provided by the countrys central bank approved secretly by the European Central Bank in Frankfurt. If Greece were to leave the eurozone, the immediate cause might be an ECB decision to pull the plug.
Extensive use of emergency liquidity assistance (ELA) to help banks in the weakest economies has been one of the less-noticed features of the eurozone crisis. Separate from normal supplies of liquidity and meant originally as a temporary facility for national authorities to use when banks hit problems, ELA proved a lifesaver for the financial system Ireland and is now even more so in Greece. As such, it has given the ECB which has ultimate control over the facility considerable power to determine countries fates.
Whether that power would ever be exercised is unclear. ELA is a subject on which the ECB is deeply reluctant to provide information even on where or when it is provided.
You dont say when you are in an emergency situation, because then you make the situation worse. So I really dont see the usefulness of being more transparent, Luc Coene, Belgiums central bank governor, explained in a Financial Times interview this month. The ECBs guard slipped a little late last month. Its weekly financial statement published on April 24, showed an unexpected 121 billion increase in the innocently titled heading other claims on euro area credit institutions, the result of putting all ELA under the same item. By definition, 121 billion was the minimum amount of ELA being provided by the eurosystem the network of eurozone central banks. By scouring ECB and national central bank statements, analysts have since pieced together more details. Analysts at Barclays, for instance, reckon Greece is now using 96 billion in ELA, with Ireland accounting for another 41 billion and Cyprus 4 billion. If correct, total ELA in use has exceeded 140 billion more than 10 per cent of the amount lent to eurozone banks in standard monetary policy operations. Because of the risks of extra liquidity creating inflation, ELA in excess of 500 million requires approval by the ECBs 23-strong governing council: its use can be stopped if two-thirds of the council oppose an application.
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