The Big Fat Ecb Cockup Thread

[interestrateripoff]

ECB warns of record low interest rate threat to insurers ECB working on the assumption that Greece won't leave euro - Constancio ECB's Constancio - Stability risk if market sell-off dents recovery Deflation threat retreats as euro zone households see rising prices ECB's Nowotny says no to loosening funding for Greece now

[interestrateripoff]

ECB fears 'abrupt reversal' for global assets on Fed tightening

The ECB’s financial stability report describes a 'fragile equilibrium' in world markets, with a host of underlying risks

Comment

• ECB told off by ombudsman for fumbling market moving speech

[billybong]

From the "ECB told off by ombudsman......" link

The European Central Bank has come under attack from the EU after it allowed hedge funds early access to market moving information.

Attendees of a speech by ECB executive board member Benoit Coeure were able to profit by trading on his remarks, some 10 hours before they were made public.

Rotating door with FIFA?

Just told off - ombudsman turns into omdudsman.

Edited May 29, 2015 by billybong

[interestrateripoff]

http://www.forbes.com/sites/timworstall/2015/02/25/the-eurozone-taxpayers-possible-loss-on-ecb-qe-is-e3-4-trillion/

This is a very clever little point being made here. In effect, the end of it being that the Bundesbank has comprehensively lost the European argument about who is at risk from any one of the eurozone governments defaulting. The basic Bundesbank insistence was that the German taxpayer must not be on the hook for any default by a eurozone government. That would be mutualisation of the debt and that was strictly verboeten. Indeed, it’s said that such mutualisation would be a breach of the German constitution. However, one detail of the way that the European Central Bank (and the rest of the monetary system for the eurozone) is set up means that quantitative easing, that QE, does indeed leave German taxpayers at risk. And the total risk to all eurozone taxpayers could be €3.4 trillion. Which is really rather amazing when you think about it as that risk is rather higher than the total amount of QE which is to be undertaken. The solution to that part of the puzzle being that those trillions are the total theoretical risk, not one that is likely to actually arrive in any likely future universe.

Much of the wrangling over QE has been about how to make sure that the taxpayers of one country are not on the hook if some other country defaults on its debt. QE works, as we know, by the central bank simply making up money and then buying (usually government) bonds with that new money. The solution to not mutualising this risk, the risk of default, has been to say that each national arm of the ECB should only be buying the debt of its own host government. And the risk of default must stay with that national arm and not accrue to the ECB at the centre. OK, that works, sorta, but it doesn’t actually isolate the link. The reason being that central banks make profits.

You won’t be surprised to know that the people who get to make money manage to make a profit from doing so. This is called “seigniorage”. There’s also, at times at least, the possibility of making a very large amount of such profits through QE. After all, you’re inventing money which you don’t have to pay interest on and then buying bonds. Bonds that do pay interest to whoever buys them. The Fed, BoE, have been making very good profits doing this and the ECB is about to start doing so. Excellent. But then there’s this clever point: losing future profits is just as much of a loss as losing money is.

The Eurosystem is, save for the allocation of voting power (ECB 2015), arranged like a joint-stock company belonging to the Eurozone member countries. It is, of course, not really such a company, and its task is not to generate profits, but to carry out monetary policy. Nevertheless, as a by-product of its tasks, the system normally does generate profits, which are then distributed via the national central banks to the respective national treasuries. The profits result from the investment of the Eurosystem’s equity capital as well as from lending self-created money against interest, or from the acquisition of interest-bearing assets with such money. If central banks were traded in the stock exchange, they would have a market or present value that is derived, as it is for every other stock corporation, from their future dividend distributions.

[interestrateripoff]

http://www.zerohedge.com/news/2015-06-28/why-ecb-suddenly-has-huge-headache-its-hands-one-chart

Last week we reported that as a result of the relentless surge in the Greek deposit flight, which may finally end tonight if, as now appears almost certain, the Greek government imposes capital controls, the ECB's claims on the Greek banking system have now surpassed the total amount of Greek deposits...

... when one factors in some €38 billion in collateralized EFSF bonds and other collateral usage.

We previously explained that on the surface, this is terrible news for Greece as it implies that the moment the last linkage between the ECB and Greece is severed, Greek deposits will have to undergo a massive haircut as without ECB liquidity backstop funding the banks at ridiculously small haircuts on what is essentially worthless collateral, the Cyprus "Plan B" will be immediately imposed.

However, a quick glance at a different balance sheet reveals that a full-blown Grexit with all bridges burned between Greece and its former "irreversible monetary union" implies someone else may have an even greater headache on their hands. The balance sheet in question: that of the Eurosystem in general, and the ECB - which is the anchor behind the Eurosystem and the Eurozone's official monetary authority - in particular.

The chart below compares total ECB claims to Greek banks (excluding SMP purchases of Greek bonds) side by side with the latest total Capital and Reserves of the Eurosystem as of June 19.

Incidentally the chart above is why earlier today Varoufakis said that "if ECB were to stop support for the Greek banking system would mean that Europe has failed." Because if indeed the ECB were to pull the carpet from under Greece as it hinted it would do on Tuesday when the Greek program runs out, when it froze the Greek ELA despite the ongoing Greek bank run, it would promptly set off a chain of events that would not only crush the Greek banking system but destroy any credibility Greek sovereign collateral had as a state, impairing all Greek national and corporate collateral, including bonds and loans currently held by the ECB, to zero.

It would also mean that as that €126 billion or so of total ECB/Eurosystem claims on Greek banks were "charged off" in case of a terminal Greek "event" then the entire ECB capital buffer would also be wiped out, leaving the ECB with negative equity. Translated: dear Eurosystem members: we need more cash.

And yes, while in theory the ECB can always print more money (and it will, in fact as we first showed Goldman's entire play has been that the ECB wants a Greek default precisely so it can boost its QE, and print stocks to new highs), an event such as this may well crush what little confidence the ECB has left: if not so much with Germany, whose commercial banks are well capitalized, but with the rest of the periphery, leading to a slow at first, then quite dramatic bank run across Italy, Spain, Portugal, Ireland and so on, in other words all those countries who have yet to address their €2 trillion bad debt problem, which the ECB eagerly brushes under the rug with every single stress test.

Will we find out next week if this is correct?

[Guest_northshore_*]

ECB Adds State-Backed Company Bonds to Its QE Purchase List

https://www.ecb.europa.eu/mopo/implement/omt/html/pspp.en.html

[Silverfinger]

ECB Adds State-Backed Company Bonds to Its QE Purchase List

https://www.ecb.europa.eu/mopo/implement/omt/html/pspp.en.html

I want to monetize my chicken coop, please. It's egg-backed.

[interestrateripoff]

Central Banker Urges Lying To The Public About Bank Health

For years, many had mocked both European and US stress tests as futile exercises in boosting investor and public confidence, which instead of being taken seriously repeatedly failed to highlight failing banks such as Dexia, Bankia and all the Greek banks, in the process rendering the exercise a total farce. The implication of course, is that regulators, thus central bankers, openly lied to the public over and over just to preserve what little confidence in the system has left. Now we know that this is precisely the policy intent: as Reuters reports citing a paper co-authored by a Bundesbank economist, "banking supervisors should withhold some information when they publish stress test results to prevent both bank runs and excessive risk taking by lenders."

In other words: lie.

Not quite lying but in a market economy supposedly based on all knowledge being disclosed it's rather funny.

[interestrateripoff]

ECB to pump in more money if inflation stalls

Good to know they will do all they can to boost inflation....

[interestrateripoff]

http://www.theguardian.com/business/2015/sep/06/central-banks-can-dop-nothing-insulate-asia-economic-winter

The European Central Bank proudly announced on Friday that it is erecting a 17-metre-high bronze and granite tree outside its Frankfurt headquarters – an artwork intended to “convey a sense of stability and growth” – and, with its gilded leaves and massive trunk, presumably also wealth and power.

But when Mario Draghi, the ECB’s president, appeared before the world’s media on Thursday at his regular press conference, it was the limit to central bankers’ power that was on display.

Draghi was forced to admit that the outlook for eurozone growth and inflation had darkened considerably as a result of the slowdown in emerging economies and the market turmoil in China – the latter an issue he said he would take up with officials at the People’s Bank of China at this weekend’s G20 meeting in Ankara.

Meanwhile, Federal Reserve policymakers will have to decide in the coming days whether to stick to their carefully signalled plan to push up America’s interest rates at their next policy meeting on 17 September, in the face of growing fears about a Chinese slowdown.

Certainly, the International Monetary Fund made it clear last week that it believed policymakers should be cautious about pushing up rates in the current fragile environment.

Central bankers slashed rates to their current emergency levels in the depths of the crisis. They also unleashed quantitative easing on a massive scale, as a short-term measure meant to prevent an outright economic slump and buy time for other engines of growth – trade, investment, consumer demand – to be restarted.

Yet even with rock-bottom borrowing costs, the recovery in many countries has been tepid, leaving central bankers little choice but to keep the cash taps on. The ECB and the Japanese central bank are still quantitatively easing; and the Bank of England and the Fed are yet to raise rates, seven years on from the collapse of Lehman Brothers. Whatever the diagnosis for the less-than-impressive post-crisis recovery – the debt overhang from the boom years, chronic underinvestment, weak consumer demand as a result of deep-seated inequality, or some other as yet undiagnosed economic disease – the cure is unlikely to lie with the central banks.

Is this a magic money tree they are putting outside their vanity offices?

[billybong]

an artwork intended to “convey a sense of stability and growth” – and, with its gilded leaves and massive trunk, presumably also wealth and power.

Not to mention intended to convey a sense of the banking system's ability to create money out of thin air. They wouldn't mention that.

So that's what their bit of the QE money, taxpayer's money and saver's money is being spent on.

Maybe the artist(s) will be able to buy a house with some of the commission - ah, the bankers' got their money first and got there first.

Edited September 7, 2015 by billybong

[TheCountOfNowhere]

ECB to pump in more money if inflation stalls

Good to know they will do all they can to boost inflation....

It's good to know they will force up prices just as people are really struggling.

F**KING CRIMINALS.

[interestrateripoff]

ECB sets capital requirements for euro zone's top lenders

FRANKFURT - The European Central Bank's supervisory arm has set capital levels that the euro zone's largest lenders must hold and will communicate its draft decisions to the banks shortly, three sources with knowledge of the matter said on Monday.

[The Aggravated Francophile]

ECB sets capital requirements for euro zone's top lenders

FRANKFURT - The European Central Bank's supervisory arm has set capital levels that the euro zone's largest lenders must hold and will communicate its draft decisions to the banks shortly, three sources with knowledge of the matter said on Monday.

Kind of superfluous if they're not going to tell us the truth anyway!

[interestrateripoff]

ECB calls for common EU approach on debt write-offs

FRANKFURT - The European Central Bank called on Tuesday for a common approach in the European Union to writing off debt, in order to make it easier to shore up a failing international banks without having to call on taxpayers.

[interestrateripoff]

ECB's Nowotny says QE programme might be extended

VIENNA - The European Central Bank's quantitative easing programme might be broadened or extended, ECB Governing Council member Ewald Nowotny was reported as saying in a newspaper interview published on Tuesday.

[interestrateripoff]

ECB gives central banks power to announce emergency funding

FRANKFURT - National central banks in the euro zone will now have the power to make announcements about any emergency funding that they provide to their banks, the European Central Bank said on Wednesday.

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ECB's Draghi defends Greek pension reforms

FRANKFURT - Greece needs to implement its pension reform to ensure it can fully pay pensions in the years to come, the president of the European Central Bank said in a letter published on Friday.

ECB chief economist declares 'Readiness and decisiveness' to act - paper

Global uncertainty changed timing of Fed rate hike - ECB's Liikanen

[interestrateripoff]

ECB's Draghi says too early to decide on further stimulus

BRUSSELS/FRANKFURT - Risks to Europe's inflation and growth outlook have increased due to the emerging market slowdown but the European Central Bank needs more time before deciding on further stimulus, ECB President Mario Draghi said on Wednesday.

[interestrateripoff]

Central banks will struggle to raise rates from zero - ECB's Praet

ZURICH - Central banks around the globe may struggle to raise interest rates because economies have got too used to ultra-low rates, the European Central Bank's chief economist, Peter Praet, said on Thursday.

[billybong]

ZURICH - Central banks around the globe may struggle to raise interest rates because economies have got too used to ultra-low rates, the European Central Bank's chief economist, Peter Praet, said on Thursday.

Peter shouldn't forget that Charles, a professor at the London School of Economics and a former top official at the Bank of England has just said in reports today that interest rates will soon be rising (shortage of cheap labour you see and economies "are at a sharp inflexion point") and even the central bankers' BIS has said that research proves that their QE/ZIRP policy has failed. Some might say it's been an abject failure.

They might well struggle but Charles says they'll have to increase rates in any event.

Edited September 24, 2015 by billybong

[Guest_northshore_*]

http://caissefrancaisedefinancementlocal...

This kind of accounting allows the ECB to hold Euro denominated Public Sector Covered Bonds with UK Public Sector collateral whilst claiming the collateral is sourced from the Euro Area.

Due to this ambiguity, can you confirm whether or not La Caisse Francaise de Financement Local's Public Sector Bond issues are therefore ineligible for the ECB's Covered Bond Purchase Programme? ...

Reply:

...Further to your e-mail of 13 April 2015, we would like to clarify that, according to ECB’s eligibility rules for the CBPP3 (with the exception of Multicédulas), the underlying covered bond pools must conform with EU legislation and more specifically with the Capital Requirements Directive (Part 1, points 68 to 70 of Annex VI to Directive 2006/48/EC) or, as of 1 May 2015, with the Capital Requirements Regulation (Article 129(1) to (3) and (6) of Regulation (EU) No 575/2013).

Moreover, besides EU legislation, specific national covered bond legislation applies that can also include additional restrictions on the type of loans foreseen to be included in the underlying covered bond pools. The provisions included in these legal acts are deemed sufficient by the Eurosystem. Regarding the specific loans included in the underlying cover bond pools, the Eurosystem currently does not require loan-by-loan information.

Finally, we would like to clarify that the individual ISIN information that you request is not public and recall that information on individual securities purchased under the covered bond purchase programme CBPP3 is not disclosed for the reasons explained in detail in the ECB’s replies to your earlier enquiries.

[interestrateripoff]

EU court dismisses claims against ECB over Greek debt

LUXEMBOURG - An EU court on Wednesday dismissed claims by more than 200 Italian investors against the European Central Bank over Greek debt restructuring in 2012, saying their losses were part of normal financial market risk.

If only they were the banks, losses aren't allowed and you get free money.....

[interestrateripoff]

Seeping pessimism holds back euro zone recovery - ECB's Praet

MANNHEIM, Germany - Pessimism is holding back the euro zone's economic recovery as firms withhold investment, and reforms, particularly to boost productivity, are needed to shift long-term expectations, European Central Bank chief economist Peter Praet said.

[interestrateripoff]

ECB's Weidmann - downside growth risks have increased