ECB to con­sider ask­ing for cap­i­tal in­crease as cush­ion

ABC Cer­ti­fied

The Pak Banker - - Front Page -

FRANK­FURT: The Euro­pean Cen­tral Bank is con­sid­er­ing ask­ing euro-re­gion mem­bers for a cap­i­tal in­crease to pro­tect it­self from any losses stem­ming from its govern­ment bond pur­chases, said a eu­roarea cen­tral bank of­fi­cial with knowl­edge of the talks.

The Frank­furt-based ECB's sub­scribed cap­i­tal amounts to 5.8 bil­lion eu­ros ($7.8 bil­lion), ac­cord­ing to its web­site. No de­ci­sion has yet been made on whether to ask for a cap­i­tal in­crease, said the of­fi­cial, who spoke on con­di­tion of anonymity. The mat­ter may be dis­cussed at the next Gov­ern­ing Coun­cil meet­ing on Dec. 16, the per­son said. The de­bate sug­gests the ECB is concerned its pro­gram to buy the bonds of strained gov­ern­ments such as Por­tu­gal and Ire­land, which now to­tals 72 bil­lion eu­ros, may end up sad­dling its bal­ance sheet with losses. Bun­des­bank Pres­i­dent Axel We­ber op­posed the pur­chases when they were started in May and the risk is that seek­ing govern­ment sup­port raises new ques­tions about the ECB's in­de­pen­dence from pol­i­tics.

"The link to this po­ten­tial hike in ECB cap­i­tal and what's go­ing on in the mar­kets is cer­tainly the fact that the ECB is buy­ing govern­ment bonds which are not AAA-rated and are more risky than bunds," said Marco Valli, chief euro zone econ­o­mist for Uni­Credit SpA in Mi­lan. The ECB's po­ten­tial cap­i­tal request was re­ported by Reuters late yes­ter­day. -PB News

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