Greek, Irish Risks Transferred to ECB

Speigel has an interesting discussion on the Euro:

Since the beginning of the financial crisis, banks in countries like Ireland, Portugal, Spain and Greece have unloaded risks amounting to several hundred billion euros with central banks. The central banks have distributed large sums to their countries’ financial institutions to prevent them from collapsing. They have accepted securities as collateral, many of which are — to put it mildly — not particularly valuable.

Risks Transferred to ECB: These risks are now on the ECB’s books because the central banks of the euro countries are not autonomous but, rather, part of the ECB system. When banks in Ireland go bankrupt and their securities aren’t worth enough, the euro countries must collectively account for the loss. Germany’s central bank, the Bundesbank, provides 27 percent of the ECB’s capital, which means that it would have to pay for more than a quarter of all losses.

The full piece is worth a read . . .

click for larger graphic


The Hidden Cost of Saving the Euro
ECB’s Balance Sheet Contains Massive Risks
Matthias Brendel and Christoph Pauly, 05/24/2011,1518,764299,00.html

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