The ECB released what looks to me like an important document on Friday. In response to a February 26 Communication from the European Commission, it sets out the ECB’s recommended guidelines on “asset support schemes”, i.e. over-priced purchases of impaired assets by the state or under-priced state insurance of these assets. I have described my objections to these proposals a number of times and won’t go into them again here. A quick look at the ECB document didn’t reveal anything that made me more convinced of the merits of these proposals (though I may report back after I’ve had a bit more time to read the document in detail).
In the Irish context, my concern is that the EU and ECB documents seem likely to convince the government that these schemes should be pursued. However, there are other ways to go about dealing with our banking problems and a broader debate needs to be had than simply focusing on the details of how asset support schemes should be implemented.
2 replies on “ECB on Asset Support Schemes”
Both the ECB and the Commission documents are highly significant not so much for their content – which is vague on many crucial issues – but for the signals they send to Member States and to the markets.
Fundamentally, the Commission and the ECB are giving are the green light to “asset relief” programmes of two broad types – “bad banks” and “asset insurance”. Both documents have an advisory rather than a peremptory approach but Member States who want to pursue such schemes will interpret them as supporting whatever scheme they devise.
A significant sentence in the Commission document: “In the absence of sufficient coordination ex ante, many of these objectives will only be met by additional State aid control requirements ex post.” Translation: if you behave like the Irish and only inform us after the fact, we will impose conditions via “State Aid” rules.
[…] as EU State aid approval.. Well, let’s take a look at those EU guidelines, which I flagged here a few weeks ago. Page 10 of the Commission document has stuff like this: As a first stage, […]