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We are not first to use emergency liquidity assistance to dig out lenders

While Ireland's use of emergency liquidity assistance (ELA) is a major talking point throughout the globe, the path has been well-trodden by our European neighbours.

The UK

The Bank of England's use of ELA first hit the headlines when it admitted giving Northern Rock funds in September 2007, as the bank teetered on the edge of collapse.

News of the bailout led to an almost immediate run on Northern Rock's deposits, so when the Bank of England began issuing ELA to Royal Bank of Scotland (RBS) and Halifax Bank of Scotland (HBOS) in 2008, the £60bn (€70.5bn) scheme was kept quiet.

Details of the arrangements did eventually become public in late 2008, when Bank of England officials appeared before the British government's Treasury Committee.

They told the committee the support began on October 1 when embattled HBOS began drawing cash, while RBS joined up six days later.

The facility peaked on October 17 when the two banks jointly owed £61.6bn.

Significant restructuring and state investments in the banks meant both were weaned off ELA by January 16, 2009.


Belgium's central bank became the eurozone's poster child for emergency liquidity assistance when it extended exceptional support to ailing Fortis Bank in September 2008. Fortis ran into trouble on September 26, when it reported a liquidity deficit of €5.4bn and had to resort to drawing cash from the European Central Bank's (ECB) last-resort marginal facility.

By the end of that day, Fortis had used up all the collateral the ECB would accept, and so the National Bank of Belgium (NBB) was forced to step in with ELA.

The scale of the ELA soared at an alarming rate, growing from €14.8bn in September 29 to €51bn by October 3, all publicly guaranteed by order of the Belgian government.

Against such massive challenges, Fortis was swiftly restructured with parts sold off to the governments in Belgium, Luxembourg and the Netherlands.

The ELA was wound down by October 9.


Sweden's Carnegie Investment Bank was the next eurozone institution to call on liquidity assistance, drawing down SEK 5bn (€570m) in support from its Riksbank in October 2008.

The emergency facility was converted to a loan of the same amount in November 2008, after Carnegie had been seized by the Swedish National Debt Office.

This aid was approved by the European Commission after Sweden promised to establish a liquidation and restructuring plan for Carnegie by April 25, 2009.

laura noonan

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