thanks for that ECB link Karl. Interesting web page. BOH.

May I ask if you could tell me where you have been reading that (as I would like to keep my eye on that aspect)? I’m not aware that the general public have been taking their money out of accounts and stashing it under the proverbial mattress. Are you talking about ‘institutions’ removing their money from Greek banks (mind you, I would be surprised if that hadn’t already happened)?

A general run on the banks would be very worrying. Could you imagine the protests in Athens if there were a banking ‘holiday’/closure or cashpoint machines all suddenly stopped working? That would result in “changing the course of history” stuff in the current climate. A bit like Brown’s gaffe the other day. He didn’t so much shoot himself in the foot as the head. Funny how one small thing can alter the course of nations.

http://www.ecb.int/paym/coll/html/index.en.html

Hours of fun for all the family.

Any more detailed post is likely to be removed, in my experience.

I share your confusion. When I was told “ECB money is securitised on the banks assets” (or something) I was wondering..what precisely is a “qualifying security”?

If it just delays the inevitable - I’m a nay

If the interest rec. > the cost for us of raising funds for the same tenor then yes it will be loss making, albeit a very small loss in the greater scheme of things. A small price to pay in the name of solidarity, after all we may be in a very similar situation very soon.

All in favour of the ECB buying sovereign debt say aye!

If the 5% interest recieved over the Greek loan upon (given Greece doesn’t default on this, which it probably will anyway) falls below the interest paid on Irish government bonds during an extended period, will we be making loss? How large could that loss be? Does it also depend on the term of the rescue loan’s maturity?

Lenihan made the argument that this is a loan, not a bailout. It seems to me this ‘loan’ is going to be potentially seriously loss-making.

This same confusion between Irish banks and Irish outlet of non-Irish banks is at the heart of inaccurate figures about this county’s external indebtedness. It is still reported in some places that Ireland’s external debt is around 1,000bn which is the highest in the world (next to Iceland). As Rossa White of Davy has shown, the figure includes the IFSC outlets and the true figure in 350-400bn.

Sorry for the lack of clarity.

ECB repo operations are based on qualifying securities so the ECB basically cant lose (unless it gets stiched up with a load of Greek debt).
So the ECB doesn’t have to worry about Anglo.

The Irish Central Bank has from memory advanced about 7 billion to Anglo. This is as far as I see totally unsecured, except for the government guarantee, and so that money has effectively been already flushed down the toilet.

you have me all confused now

Say an average 30% bond allocation to €70bn under maangement, might give a guess of around €1 billion in holdings.

I think you are confusing the ECB with the Irish Central Bank which has made substantial advances to Anglo which we (the Irish people) can wave goodbye to.

I didn’t think the ECB had ‘money on deposit’ as such. The banks deposit reserves and excess liquidity with the ECB, but that is the reverse. Minister Ryan has confused the two in the past as have other ministers…

The wrinkle comes in that it is not the ECB in Frankfurt that takes the loss, but the National Central Bank. The NCB has as its backstop… eh, the taxpayer… Roll up, roll up, the magician is here…

I understand the ECB has substantial deposits with Anglo apart from any repo operations. They are two different issues.

In anglo’s last annual accounts (from about a year ago) it states that the securities under repo with the ECB were covered bonds, a type of asset backed security.

Is a repo of this sort non recourse? If the security did not cover the amount lent - despite whatever haircut it was lent at - would the ECB not become a creditor for the balance in any wind up?

correct. 450mio in year 1, then 400mio in year 2 & 350mio in year 3 would be the assumption (as Greece is reducing down their deficit they should require less each year)

The other thing that George Lee mentioned, is the fact the EU zone was set up to allow free movement of capital and investment. This is where the private debt aspect of things comes in. It was the private banking institutions who created the private debt. George Lee noted in his lecture how Fingleton was challenged at one point, and told he shouldn’t be offering loans at 5 times earnings to individuals. But Fingleton got his way, arguing that if people didn’t get credit through Nationwide, they would simply get it somewhere else. While Europe was giving a gold star to Ireland for its sovereign book keeping. There was noone looking at how private debt was being created. BOH.

Caveats aside, the Peterson Institute’s hypothesis comes close to making sovereign debt and private debt equivalent.

I was listening to the George Lee lecture linked from Stephen Kinsella’s blog. George Lee observed in his lecture, how Ireland gave up its economic policy instrument when we joined the single European currency. Every year, Ireland sent its homework to Europe to be assessed and every year, Ireland would get a gold star, because we were the best student in the class. So for years and years, Ireland’s structural problems (with regard to the revenue the Irish government simply assumed would always be there, €100k tax take per house being built in Ireland - Ireland was building many times the no. of houses per head of population the UK even was building with its construction boom) were not identified by Europe. And now Europe has taken away our gold star and told us, it’s our fault that we stepped on a landmine. BOH.

I am assuming that the “collateral” for the ECB deposits in Anglo is the Govt Guarantee. If it is not extended then presumably the ECB will demand the money and if not paid the Guarantee will be enforceable in the future.

Typo there, I think?