Central Bank 'in secret lending deal'
The Central Bank is relying on a secret arrangement with other euro area central banks in order to avoid breaking European finance rules, according to news service Bloomberg.
The deals are to ensure that the Central Bank is not seen to be "lending" €25bn to the Government under the deal that wiped out the notorious Anglo Irish Bank promissory notes.
That could fall foul of a ban on so-called "monetary financing" or direct lending to the Government, three people familiar with the matter told the news service.
Under the Anglo deal, the State gave the Central Bank €25bn of bonds, that taxpayers must ultimately repay, to replace a promise to honour Anglo's debts.
It pushes against euro area limits on how much of its own Government's bonds a central bank can hold, the sources told Bloomberg.
Now, in order to stay inside the limits, the Central Bank has been given the go-ahead to "borrow" unused lending capacity from central banks elsewhere in the 17-nation currency bloc, the people said.
It was not clear whether the euro area as a whole or individual central banks were sharing their excess capacity, the report said. Such sharing means the euro area does not go over its notional limits. It is allowed under the confidential Agreement on Net Financial Assets.
A spokesman for the European Central Bank declined to comment on the Irish case.
A spokeswoman for the Central Bank also declined to comment. (Additional reporting Bloomberg)