The ECB might have called it “fine-tuning” but its decision to inject nearly €95bn into the eurozone banking system, the largest such intervention since the September 11 2001 attacks, is anything but, says Lex, asking: Does the ECB know something the rest of the world does not? After all, the Fed on Tuesday gave no inkling of a systemic threat arising from the stream of banks and funds confessing to subprime-related problems – BNP Paribas being the latest. In fact, concludes Lex, we saw a kneejerk response by the ECB to a rise in the market overnight interest rate. “The real question, therefore, is not what the ECB knows, but what the 49 banks participating in Thursday’s operation know – or fear,” it says, concluding that the fact that banks could suffer such a collective loss of nerve says a huge amount about their view of how far lending standards and transparency have deteriorated.

This entry was posted by Gwen Robinson on Friday, August 10th, 2007 at 5:51 and is filed under Capital markets, Hedge funds. Tagged with ecb. Edit this entry.