ECB kills hopes of special lending facility for banks
EUROPEAN Central Bank president Jean-Claude Trichet yesterday ruled out a long-awaited "medium-term funding facility" for Ireland's banks, insisting it was "not a possibility".
The comments come weeks after ECB executive board member Lorenzo Bini Smaghi re-ignited hopes of the €50bn facility for Irish banks by saying that the ECB was "establishing funding plans" for institutions in Greece, Ireland and Portugal.
The Irish Independent has learnt that the "funding plans" referred to by Mr Bini Smaghi were actually the banks' own proposals for reducing their massive dependence on last-resort money from the ECB.
The plans were submitted to the Central Bank of Ireland by AIB, Bank of Ireland, Irish Nationwide and EBS at the end of June, and have since been forwarded to Frankfurt. Mr Trichet yesterday effectively killed any hopes of a special ECB facility that would loan money to banks in Portugal, Ireland and Greece.
Asked about the facility, Mr Trichet replied: "No I don't think it's a possibility. It is not. It's been said very, very clearly that we had our instruments and we were utilising our present weaponry."
The ECB offers money through its "regular" auctions for periods of up to three months, provided banks have enough high-quality assets to offer the ECB as collateral.
Banks that run short of eligible collateral can also tap the emergency liquidity assistance (ELA) facility that is funded by the ECB and administered through national central banks.
The Central Bank of Ireland has Europe's biggest ELA fund, with as much as €70bn on loan to banks at one point.