Here are a few comments on ECB’s latest financial statement for the week ending at 16 March 2012:
- Deposits related to margin calls dropped to nearly zero (a decrease of more than 17 billion €). This is clearly a very positive sign, highlighting the fact that the collateral posted by European banks to the ECB in its refinancing operations achieved a value close to the one during the loans inception. There was also a drop in the deposit facility which was offset by increased usage of the current accounts.
- ECB’s lending to financial institutions increased by more than 31 billion €. The troubling fact was that 11 billion € came from increased use of the marginal lending facility (an overnight facility). Another 24.6 billion € are attributed to the latest MRO which came at 42 billion €, a number much larger than the recent MROs after the second LTRO. On the other hand, the ‘Other assets’ category dropped by 45,6 billion €. In it’s recent February balance sheet, the central bank of Italy had a fine-tuning (??) operation of 46.9 billion €, which was booked as ‘Other assets’ in ECB’s weekly statement. It seems that this operation probably ended this week and was replaced by increased short-term funding through the MRO and marginal lending facility, keeping total bank funding steady.
Economy View 
7 Σχόλια
Comments feed for this article
23 Μαρτίου, 2012 στις 17:31
Mindkaiser
«This is clearly a very positive sign, highlighting the fact that the collateral posted by European banks to the ECB in its refinancing operations achieved a value close to the one during the loans inception.»
Well, that’s one way to look at it I guess. But the overall drop of the asset side and especially the drop in the «other assets» category, has me leaning towards the idea that there were refinancing operations with non-investment grade credit claims as collateral, that simply weren’t rolled over.
23 Μαρτίου, 2012 στις 21:58
kkalev
Well, the drop in the asset side was more or less equal (especially if you don’t take into account various other ‘claims’ categories) with the drop in margin calls. I ‘m not so sure if the margin calls and the Italian central bank operation are related. I ‘m curious to see next week’s financial statement (after the icrease in periphery bond yields).
Also, it’s not clear if the ECB allows collateral substitution in its LTROs. The documentation i ‘ve been able to find seems to suggest that it depends on the NCB. Maybe you ‘re aware of more details on the subject.
24 Μαρτίου, 2012 στις 04:28
Mindkaiser
Are you referring to this note?
«Between 2007 and 2013, an intermediate regime is in place for credit claims, allowing each NCB to choose the minimum threshold
for the size of credit claims eligible for collateral purposes, apart from cross-border use, and to decide whether a handling fee should
be applied. In the course of 2013, a fully unified regime will be in place.»
30 Μαρτίου, 2012 στις 00:05
kkalev
Not really. As i said, i haven’t been able to find any definite statement by ECB that collateral substitution is allowed in ROs (which means that collateral maturity can be lower than operation maturity, which is important in the case of the 3Y-LTROs). I remember an article on zerohedge claiming that ECB did not allow substitution. Documentation from central bank of Ireland noted that it’s more or less a decision for each NCB to make. So things are a bit unclear for me. I ‘m sure the bank desks that trade with the ECB/NCBs know more 🙂
9 Απριλίου, 2012 στις 10:51
Mindkaiser
Sorry Kostas, the previous note was exceedingly out of context.
Don’t know what I was thinking about at that moment.
But I trust this is to the point:
«ECB: THE IMPLEMENTATION OF MONETARY POLICY IN THE EURO AREA»
«Furthermore, in spite of their eligibility, national central banks may decide not to accept the following marketable or non-marketable assets as collateral:
• debt instruments falling due before the maturity date of the monetary policy operation for which they are being used as underlying assets; (note 24)»
and
«note 24:If the national central banks were to allow the use of instruments with a maturity shorter than the monetary policy operations for which they serve as underlying assets, counterparties would be required to replace such assets at, or prior to, maturity.»
So it’s clear that accepting collateral with a maturity mismatch to the operation is up to the NCB’s discretion.
Nevertheless, I was awestruck not to find a single reference on collateral maturity mismatch on the official guidelines on MPIs and Procedures (09202011)
29 Μαρτίου, 2012 στις 18:46
George
http://www.market-talk.net/index.php/id/9923
Αδερφε ριξε μια ματια σε αυτα εδω τα video ειδικα εκει που μιλαει ο Γεννηματας για τις κεντρικες τραπεζες..Ειναι αρκετα ενδιαφερον..
Μου εκανε εντυπωση που αναφερει οτι η ΕΚΤ δεν εχει το δικαιωμα της εκδοσης χρηματος…
29 Μαρτίου, 2012 στις 23:59
kkalev
Δυστυχώς μου είναι λίγο δύσκολο να δώ δύο βίντεο συνολικής διάρκειας 2 ωρών για να μπορέσω να απαντήσω στο σχόλιο σας. Αν τυχόν γράψετε εδώ ορισμένα σημεία που σας ενδιαφέρουν θα χαρώ να σας απαντήσω.