what is our central bank up to?

ei.sdraob

interesting article/graphs here today

The ‘Other Assets’ of the Central Bank are now at €34.606bn, having jumped from €14.378bn in August and from the €21.195bn in September (which we reported last week). That’s a rise of over 140% from August to October. But what, on the face of it, is going on, and what does it mean?

...
Well, the total amount of ‘assets’ in the Irish Central Bank has risen by a total of €55.3bn from August to October, from €130.310bn to €185.815bn . But only €35bn of that has been captured by the ECB-related columns in (f) and (g) referred to by the Central Bank above.

The other €20bn has been added to the ‘Other Assets’ column.

Is our central bank using some creative accounting to accumulate billions of Irish bank "assets"? what's going on here

Sticky_Fingers

From posted link:

All of which seems to point to some euro quantitative easing happening on Dame Street in Dublin. How long will the ECB allow this situation continue?

What
Sorry for being a bit of a thicko but does this mean that we are printing money in order to pad out our money supply, can we even do that? Where is the money coming from? Are they moving imaginary assets around or upping the value of existing assets?

It seems we have entered the uncanny valley of accounting...

ashleey

http://www.youtube.com/watch?v=PTUY16CkS-k&feature=player_embedded

Sticky_Fingers

ashleey wrote: »

http://www.youtube.com/watch?v=PTUY16CkS-k&feature=player_embedded

I didn't watch the video, that type wrecks my head. I thought the only body in the Eurozone allowed to increase the money supply is the ECB, not the individual member states. AFAIK we need permission from the big boys before we start pulling wads of cash out of our backside.

ei.sdraob

Sticky_Fingers wrote: »

I didn't watch the video, that type wrecks my head. I thought the only body in the Eurozone allowed to increase the money supply is the ECB, not the individual member states. AFAIK we need permission from the big boys before we start pulling wads of cash out of our backside.

Well thats 20 billion added to "Other Assets" category :eek:

i am sure no one will notice :P

Sand

Ashleey that link runs into a brick wall about a minute in when they discuss deflation and cant figure out why deflation is bad for an economy (people delay purchases/investment at all levels of the economy, waiting for prices to fall further = economy collapses). Or perhaps more dishonestly, they understand why deflation is bad for an economy but ignore it for the sake of their argument.

Re:Central Bank

David McWilliams pointed out a year back that the Central Bank had secretly lent 10 billion to Anglo Irish, over and beyond the government bailouts.

ashleey

I was just trying to cheer everyone up. I think it's more about criticising Goldman s

ei.sdraob

PrimeTime (~7:40) tonight mentioned 20 billion being handed to the banks from the central bank

That might explain this ~20 billion euro of "Other Assets"

hmmm

ei.sdraob

RTE reports that its up to 70 billion now with 19 billion being added in last month alone...

dan_d

Funny...I seem to remember reading this in a recent article somewhere.
Do we know what they're up to yet??

ei.sdraob

Yes giving money to banks using very low quality collateral that the ECB is not willing to accept, Irish banks also owe the ECB 117 billion

so thats 187 billion euro in total :eek:

more here

DUBLIN, March 11 (Reuters) - Ireland's central bank lent domestic banks a record 70 billion euros in special funding in February, a jump of 19 billion euros, underlining the fragility of the sector and the state's exposure to it.

The jump in handouts also ratcheted up pressure on newly appointed Prime Minister Enda Kenny to secure more support for the country's lenders from fellow euro zone leaders at a summit taking place in Brussels.

Irish banks, at the root of the country's financial crisis, are dependent on funding from the European Central Bank (ECB) and their own central bank after suffering deposit outflows and being frozen out of interbank lending markets due to concerns about their future.

Ireland-based banks' reliance on funding from the ECB eased to 116.9 billion euros from 126 billion euros at the end of January, the data on Friday showed. Some of this ECB funding is to foreign lenders based in Ireland. In January, they accounted for around a quarter of those funds, the central bank said.

Taken together, banks in Ireland borrowed some 187 billion euros from the ECB and the Irish central bank, equivalent to around 120 percent of the country's annual economic output.

Of course we own all the Irish banks now so its another form of public debt...

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edit: in other news

* bond yield hit a record high yet again

* ECB stopped buying bonds from the likes of Ireland, Portugal etc after having spent 77.5 billion

Scofflaw

I thought we'd been over the whole Central Bank "other assets" thing quite enough times for this not to be any surprise. As ei.sdraob says, the banks have limited stocks of the higher-quality collateral that the ECB will lend against, and when they need to borrow beyond that they tap the Central Bank, which lends at a higher rate on less secure collateral.

What has happened here is a change in where the covered banks are getting their short-term funding, due to a change in the ECB's collateral rules:

Ireland-based banks' reliance on funding from the ECB eased to 116.9 billion euros from 126 billion euros at the end of January, the data on Friday showed. Some of this ECB funding is to foreign lenders based in Ireland. In January, they accounted for around a quarter of those funds, the central bank said.

Taken together, banks in Ireland borrowed some 187 billion euros from the ECB and the Irish central bank, equivalent to around 120 percent of the country's annual economic output.

Ireland's central bank said on Friday that over half of the increase in its special funding was due to the ECB tightening its rules on collateral for loans. It now requires hard-to-value asset-backed securities to have two ratings rather than just one.

"A change in Eurosystem collateral rules led to some additional temporary reliance on exceptional liquidity assistance while the relevant collateral was being reconfigured to restore eligibility," the Irish central bank said in a statement.

In other words, the ECB has tightened its rules on collateral, so the Irish covered banks are borrowing from the ICB while they re-jig their collateral to meet the ECB's new rules. When the February figures for Irish covered bank borrowing from the ECB are available, we'll be able to see whether any new debt has actually been added here, as opposed to just a movement of existing debt between the ECB and ICB due to collateral requirements. Until we know that, only the intellectually lazy or challenged will assume this is new debt to get excited about.

ei.sdraob wrote:

Taken together, banks in Ireland borrowed some 187 billion euros from the ECB and the Irish central bank, equivalent to around 120 percent of the country's annual economic output.

Of course we own all the Irish banks now so its another form of public debt...

No. How many times does this need to be explained? Look at the phrasing - "banks in Ireland". That means - and the article is explicit about it in only the previous paragraph - that the figure covers IFSC banks that the Irish taxpayer does not have any exposure to, which makes your comment completely inaccurate.

regards,
Scofflaw

ei.sdraob

Scofflaw wrote: »

No. How many times does this need to be explained? Look at the phrasing - "banks in Ireland". That means - and the article is explicit about it in only the previous paragraph - that the figure covers IFSC banks that the Irish taxpayer does not have any exposure to, which makes your comment completely inaccurate.

regards,
Scofflaw

Which of the IFSC banks have no access to the market? as opposed to the main 5-6 banks here

Scofflaw

ei.sdraob wrote: »

Which of the IFSC banks have no access to the market? as opposed to the main 5-6 banks here

No market access isn't the only reason for borrowing from the ECB - the covered banks had money borrowed from the ECB all the way from 2003. In December 2007 the covered banks were into the ECB for €15.101bn, even though they had market access.

Figures for the covered banks are released by the Central Bank - you don't have to offer analysis based on the extremely limited and often inappropriate information available in articles.

regards,
Scofflaw

ei.sdraob

70 billion had to be taken from our central bank since ECB would not accept the collateral

once again which non Irish, IFSC banks have done this? how much of the 70 billion went into the 5-6 main banks here

Scofflaw

ei.sdraob wrote: »

70 billion had to be taken from our central bank since ECB would not accept the collateral

once again which non Irish, IFSC banks have done this? how much of the 70 billion went into the 5-6 main banks here

At a rough estimate, a minimum of €55bn. That's based on the close match between the rise in the CBI's "other assets" and the covered institutions "remaining liabilities - resident":

Date|CBI 'other assets'|Covered banks' 'remaining liabilities'
09/10|14,378 | 35,776
10/10|21,195 | 44,285
11/10|34,606 | 48,793
12/10|44,674 | 65,858
01/11|51,122 | 74,052
02/11|70,068 |??

The CBI 'other assets' was steady at €12-14bn for several months before that - the jump comes at the end of the guarantee. The 'remaining liabilities' were also fairly steady around €27-30bn, which tells us that the 'remaining liabilities' covers more than CHI other assets. However, the total CBI jump there is €36.744bn, the remaining liabilities jump for the covered institutions is €38.276bn.

Assuming the c. €19bn in February is also the covered banks seems reasonable, although we won't see whether their 'remaining liabilities' has also jumped until that figure is released.

Now, coming back to the figure you were citing:

Taken together, banks in Ireland borrowed some 187 billion euros from the ECB and the Irish central bank, equivalent to around 120 percent of the country's annual economic output.

That figure is explicitly not the borrowings of the Irish covered banks. The article actually says so in the previous paragraph:

Ireland-based banks' reliance on funding from the ECB eased to 116.9 billion euros from 126 billion euros at the end of January, the data on Friday showed. Some of this ECB funding is to foreign lenders based in Ireland. In January, they accounted for around a quarter of those funds, the central bank said.

Taken together, banks in Ireland borrowed some 187 billion euros from the ECB and the Irish central bank, equivalent to around 120 percent of the country's annual economic output.

In fact, the CBI figures show that the borrowings from the ECB for the covered banks at end-January stood at €92.950bn - and as I'm sure you can see, that's a smaller figure than the €126bn cited in the article, and on which the €187bn figure is based. About, in fact, three-quarters, just as the article you cited says.

So the amount actually outstanding between the ECB and CBI is...well, that depends on whether the fall in ECB borrowing was a fall in borrowing by the Irish covered banks. And we'll know that when the Central Bank releases the February stats.

If it is, then the figures for the ECB+CBI borrowings of the covered banks will stand at something like €135-150bn. Not, as you can see, €187bn, because that figure includes banks resident in Ireland which are not covered institutions.

cordially,
Scofflaw

ei.sdraob

150 billion is what RTE have mentioned outstanding by Irish main banks (exact quote) to ECB and CB
which is still an incredible amount.
sure whats 150 billion between friends, we are now at a stage where people simply dont comprehend what has been put on their shoulders, a billion here a billion there and people stop caring until the local hospital closes down.

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edit: more on this story

It was expected that the ELA (accounted for in ‘other assets’) would drop by €17.5bn to reflect the FRNs that were issued by the Irish banks in January. So, the expected figure would be in the region of €34bn. The numbers show the complete opposite. Other assets at the end of February stood at €70bn.
....
So, it seems that Irish banks are running out of deposits, running out of collateral, and running to the Irish Central Bank to keep their doors open.

ei.sdraob

@Scofflaw

http://www.rte.ie/news/2011/0429/credit-business.html

Bank borrowing from the Irish Central Bank fell by €5 billion last month to stand at €111 billion. Domestic banks accounted for €82.8 billion of this, down €5.9 billion during the month.

Were up to 82.8 billion now for domestic non IFSC banks ...