Monday 27 March 2017

ECB chief insists Frankfurt has supported latest bailout

Jean-Claude Trichet, president of the European Central Bank, answers reporters' questions during his monthly news conference at the ECB headquarters in Frankfurt yesterday
Jean-Claude Trichet, president of the European Central Bank, answers reporters' questions during his monthly news conference at the ECB headquarters in Frankfurt yesterday
Laura Noonan

Laura Noonan

ECB chief Jean-Claude Trichet last night insisted that Frankfurt had taken "important" steps to support the new banking bailout, but refused to be drawn on the prospects of creating the €60bn funding facility sought by the Government.

The ECB president also defended the bank's decision to "ask" governments across Europe not to force losses on so-called senior bondholders who loaned the banks money.

He confirmed that the Frankfurt powerhouse would not seek to push the pace on injecting cash into the Irish banks by forcing the Government to set a firm deadline for actually recapitalising the banks.

The comments came at a Frankfurt briefing almost a week after the Government announced plans to pump as much as €24bn of capital into AIB, Bank of Ireland, EBS and Irish Life & Permanent.

The Government had also been hoping to announce a "medium-term funding facility" from the ECB, which is lending about €160bn to Ireland's banks on a short-term basis.

There was widespread disappointment in the market when this facility did not materialise.

Mr Trichet yesterday insisted that the ECB had made an "important" contribution to the package by agreeing to continue to accept government guaranteed debt as collateral in its regular auctions even if this debt was downgraded.

But he repeatedly declined to comment on whether a medium-term funding facility was in the making, but said the ECB was "looking at ways" to tackle so-called persistent bidders who were addicted to ECB liquidity.

"The nature of that has changed over time because of the correlation of the credit worthiness of the sovereigns and the credit worthiness of the banks," he added. "If and when we have a decision we will announce it."

The ECB did confirm that it would continue giving unlimited money to banks across the eurozone, a "non-standard" measure launched at the start of the crisis which has seen Irish banks draw down almost €90bn directly from Frankfurt.

Frankfurt has been widely blamed for blocking any Irish efforts to impose losses on the banks' senior lenders, but Mr Trichet yesterday defended this stance, saying that to do anything else would damage confidence across the eurozone.

"What we are asking . . . our governments to reflect on is the need for confidence in the market," he said. "What is important as soon as possible is that banks can get back to the market."

Europe's most powerful banker struck a more conciliatory tone on the issue of the recapitalisation of Ireland's banks.

Under the original EU/IMF plan, the banks were in line for a capital injection of up to €10bn at the end of February. The Government has now hinted that an injection of up to €24bn may be made by June, but no firm date has been given.

Irish Independent

Promoted articles

Also in Business