Easier than grabbing from the wires, from @ecb:
And on that choice…. This, from RBS’s Alberto Gallo, is timely: Read more
You may have thought this was just a car…
With Greek sovereign yields blowing wider on Thursday (and pretty much staying there), it’s worth revisiting what exactly might happen if, say, May 1 arrives and Greece fails to pay the €200m due to the IMF that day.
Received wisdom has it that the ECB will withdraw the ELA — emergency liquidity assistance — currently propping up the Greek banking system, which will promptly collapse; Tsipras and Co would then be forced to bring back the Drachma (or similar) and Greece would exit the eurozone.
But what do the “rules” here say? In the case of the ELA they run to all of two pages. Click the image to read in full. Read more
Peter Doyle, an economist and former IMF staffer, argues that for Greece continued emergency lending assistance is a necessity.
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This from Dan Davies is worth a bit of your time — supposedly four minutes of your time according to Medium’s time-thingy.
It makes the very good point that the lack of Greece-dominated headlines over the weekend is most probably good news. As Dan says, we haven’t had stories of deposit flight and bank runs, there haven’t been anymore leaked documents, the ECB hasn’t piled on any more pressure and there has been no grandstanding of note — from Greek or German politicians.
From Davies: Read more
Or, why it isn’t surprising at all that RBS and Lloyds would move their respective holding companies to the UK, probably overnight, if Scotland voted to become independent. Despite the odd packaging of this as NEWS by the UK press.
It’s the emergency liquidity (or ELA). Click chart to enlarge:
FT Alphaville began writing in detail about emergency liquidity assistance in the eurozone — that is, national central banks lending to stricken, but supposedly solvent banks on highly secretive terms, against collateral not accepted at the ECB — some two and a half years ago.
Throughout that period, the ECB’s precise oversight of this liquidity assistance remained in the dark. Despite the risk being taken by taxpayers, and despite the fact ELA effectively stopped the Greek, Irish and Cypriot banking systems from going under at various points. And despite procedures having been in place since 1999 for the ECB to restrict ELA by a national central bank if it endangers the rules of the euro (as used in Cyprus). Read more
Yes the IMF calls for common eurozone deposit insurance, in this new banking union paper. But also look at what they suggest on emergency liquidity assistance:
Lender of last resort. The lender of last resort makes liquidity support available to solvent yet illiquid banks. Centralizing all LOLR functions at the ECB would in the steady state eliminate bank-sovereign linkages present in the current ELA scheme (see Box 1). This would require changes to the ECB’s collateral policy, as by definition euro area banks that tap ELA cannot access Eurosystem liquidity owing to collateral constraints. Until such time as all banks are brought under the ECB’s supervisory oversight, ELA would be sourced through both the ECB (for banks brought under its purview) as well as national central banks (for banks that remain under national supervision, albeit with adjustments made to the national ELA limits).
Which would be nothing short of a revolution. Read more
And why this could well have been the best possible deal for Ireland.
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***DRAGHI “THERE IS NO MORE ELA”***
***WE THINK THAT’S A PROMISSORY NOTES ‘DEAL’***
Click for the feed from the Irish parliament, where legislators have until the morning to pass an emergency bill liquidating Anglo Irish’s resolution company, unlocking a promissory note deal which might be on its way, before creditors of Anglo hit the LITIGATE button. Or something. (The entire prom note deal is needed by the Irish government before the notes’ next circa €3bn interest payment, because that’s what they promised the public.) Read more
*NOONAN SAID TO PLAN ANGLO IRISH SPEECH IN PARLIAMENT
A few hours later… Read more
So, we’re going to the wire once again in the now traditional dance between Greece and the troika. As the FT reported on Thursday:
Eurozone leaders face a new round of brinkmanship over Greece’s €174bn bailout after international lenders failed to bridge differences on how to reduce Athens’ burgeoning debt levels, pushing the country perilously close to defaulting on a €5bn debt payment due next week.
The European Central Bank has recently started talking more about risk, and in particular the risks to its balance sheet. Yesterday, Standard Chartered analysts Thomas Costerg and Sarah Hewin had a note out talking about how the ECB was concerned about capital outflows from the periphery being replaced by TARGET2 inflows, and how TARGET2 imbalances might lead to a more fragmented policy. From StanChart:
ECB President Draghi recently hinted that managing risks was his utmost priority, further differentiating the ECB from other major central banks (Japan, US, UK), which have shown less reluctance about conducting broad-based quantitative easing (QE). Read more
Finally, we have seriously reiterated our request to take advantage of a direct financing line from the Greek Central Bank, via the ELA (emergency liquidity assistance), the public tool of access to banking liquidity...
NOT HALTING. SHIFTING. THEN IT GOES BACK LATER.
Today was really not the best day for the ECB to signal this: Read more
From the FT:
Athens-based bankers said withdrawals exceeded €1.2bn on Monday and Tuesday – 0.75 per cent of deposits – as President Karolos Papoulias failed in two final meetings with conservative, socialist and leftwing leaders to form a national unity government. Read more
For every 10 euros of the European Central Bank’s now almost €1,200bn of ‘normal’ liquidity supplied to banks, picture one euro of Emergency Liquidity Assistance from national central banks.
Now imagine there’s just under 10 cents within the ‘ELA’ euro which are even shadowier. (It’s a conceit, we know – just bear with us.) Read more
We have an Irish promissory notes deal! A weird one.
This is not the deal to restructure the notes (used to reanimate the IBRC, the Anglo Irish after-life vehicle) overall. This is not a deal ‘with’ the ECB at all, technically. It’s in order to defer a €3.06bn cash payment that Ireland would have had to send to the bank at the end of this month. One plan was to swap out the cash for a long-term Irish government bond, achieving the deferral for, potentially, the bond’s lifetime. Read more
The Government agrees that a limited statutory power of direction for the Chancellor over the Bank in a time of financial crisis would be helpful in clarifying lines of responsibility and accountability…
It is an irrevocable, unconditional, direct, autonomous and first demand guarantee. The guarantee is joint but not several, and the allocation between the States (respectively 60.5, 36.5 and 3% for Belgium, France and Luxembourg) remains the same. The guarantee covers financial contracts and securities…
Nov 23 (Reuters) – France, Belgium and Luxembourg are discussing how to provide temporary state debt guarantees for failed financial group Dexia… the deal has still to be confirmed, leaving the bank dependent on emergency liquidity assistance of about 30 to 40 billion euros ($40.5 – $54 billion), the [Belgian De Tijd] paper said.
Remember the guarantees would be parcelled out among the three governments, according to a ratio that may, or may not, be up for negotiation. Until then… Read more
Update — See reader comment below. This may be a case of mistaken identity (or a Bank of Greece accounting change), not liquidity usage in July. We stand corrected if this is accounting changes. ELA’s not easy to spot!
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Things you might not have noticed in recent Greek bank results:
Eurobank EFG ability to generate recurring profits is reflected in pre provision income, which amounted to €749m in 1H2011 or €324m in 2Q2011, slightly down by 3.5% over 1Q2011, mainly due to lower trading income, higher net interest income and lower costs. Read more