Move to stem emergency lending as bill hits €51bn
THE authorities are hoping to wind down massive emergency liquidity supports for Ireland's "continuing" banks by the end of the year, the Irish Independent has learned.
But sources say the crisis measures, known as Emergency Liquidity Assistance (ELA), may have to be used for years to come to deal with the legacy of Anglo Irish Bank and other 'terminating' institutions.
The ELA measures allow the Central Bank of Ireland to give cash to banks who've run out of high-quality assets that use as collateral to get funds from the European Central Bank (ECB).
ELA has been used by several countries before, but is typically only used for periods of days and weeks.
In Ireland, a massive ELA programme has been running for five months, and had reached €51bn by the end of 2010.
"ELA is by its very nature temporary, and the idea is that the Irish ELA should not continue in this way for too much longer," one source said.
Authorities are hoping that the imminent restructuring in Irish banks will see a natural reduction in the levels of ELA required.
"Banks may have to sell assets to repay the ELA they've gotten, or they may be able to raise money in the markets again once they've been restructured," said one source.
"Continuing banks would not be on ELA for the long term."
Well-placed sources admitted, however, that ELA might be extended for a longer period for "terminating banks" such as Anglo Irish Bank, which is believed to be one of the biggest ELA borrowers. While the risk for the ELA scheme is borne by the Central Bank of Ireland (CBI) and the Irish taxpayer, the support has to be approved periodically by the ECB which provides the cash.