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Sunday 11 December 2016

ECB insists the senior bondholders will not be taking a hit

Emmet Oliver Deputy Business Editor

Published 16/04/2011 | 05:00

The ECB yesterday dashed any hopes that Ireland might be allowed to impose losses on senior bondholders in banks as part of the IMF-EU programme.

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The Frankfurt-based bank also played down any talk that it might fund the Irish banks on a longer term basis.

Speaking at a sometimes heated joint EU/IMF/ECB briefing, Klaus Masuch, an ECB official, rejected the idea that burden sharing in the banks should involve not just junior bondholders, but also senior bondholders.

"It would be risky for Ireland and would undermine confidence in the Irish banking system,'' said Mr Masuch.

He was responding to a questions from broadcaster Vincent Browne who said it was not fair that Irish citizens had to bear the majority of the burden of the banks, but senior bondholders were getting repaid in full.

Mr Masuch said while clearly there were "difficult times'' in Ireland, the aim of the ECB and EU was to bring Ireland back to the capital markets.

Threat

"There is no threat from the ECB,'' he said, replying to allegations that the ECB might withdraw all funding from the Irish banks if bondholders had losses applied to them.

"We have provided substantial help to Ireland,'' said Mr Masuch.

He said at its peak ECB funding to Irish banks had touched €140bn and this money was provided at very low interest rates. "Its substantial help,'' he said.

In answer to questions from the Irish Independent, Mr Masuch said there was no plan to give Irish banks a long-term funding plan.

"The idea of a medium-term funding plan is overdone,'' said Mr Masuch, who refused to say whether such a plan was being considered by the governing council.

The €24bn package agreed for the Irish banks will allow them to absorb further mortgage hits, but it is not clear whether banks can actively write off debt for borrowers as part of this package.

Irish Independent

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