The Central Bank goes it alone?

gavinsblog

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Feb 28, 2008
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Over on thestory.ie myself and Lorcan have outlined a massive increase in the support our Central Bank is providing to the Irish banking system:

The Irish Central Bank solo run? – The Story

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.
The post was picked up by FT Alphville who said (FT Alphaville » Bailing out Ireland, bailing out banks)

‘Other Assets’ rose by €7bn in September and €13bn in October. That probably means that Anglo (and/or possibly other banks) have borrowed an additional €20bn from the Irish Central Bank in the past two months. If all changes in ‘Other Assets’ since June reflect increased borrowing from the Special Liquidity Facility, Irish banks are now funding around 16% of their balance sheets at central banks (see Chart 1), only slightly less than Greek banks.

As Lorcan points out, Anglo alone can’t have had that many bonds to repo with the central bank in October. So it’s then highly likely that other Irish banks are indeed involved. And being equated with Greek banks is not a good place to be.

Leaving a big, fat Irish bank-shaped question-mark over any bailout for Ireland or its government bonds.
Over on the Pin, yoganmahew speculates: The Irish Central Bank solo run? • thepropertypin.com

Why else would Anglo have looked to get Mr. Cowen to get deposits from the NTMA in April 2007? Because the NTMA has been used to prop up the banks. Not necessarily directly, but through the Irish Central Bank.

I don't believe it is ECB money conduited. I don't believe there is a mechanism for this to happen. The Irish NCB can 'issue' money on it own account in return for qualifying assets. It does this through emergency repo (the marginal rate) of 1.75%.

On what the assets are?
I suspect the long standing 14bn ish is the Anglo MLEC.

The new 20 bn or so are the promissory notes, I'd say. Note, because promissory notes are tradable, it may be that Anglo is trading them out to the other banks for junk bonds so the other banks can repo them for cash. Rumour has it the interbank repo market is closed to Irish bank assets...
 


Outlander

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Joined
May 31, 2007
Messages
593
Throwing good money after bad - WHY???

When this really blows up the smell will be overpowering.
 


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