European Central Bank sends central banks a €5 billion bill
FRANKFURT: Eurozone countries have been sent a bill for the increasing risks being borne by the European Central Bank as it acts to restore investor confidence in the continent's 12-year-old monetary union.
The ECB announced on Thursday that national central banks would fund a €5bn ($6.6bn) rise in its subscribed capital from the present €5.76bn.
Purchases of eurozone government bonds have been stepped up recently by the ECB, even though it believes responsibility for resolving the crisis lies mainly with eurozone governments.
In a statement, the ECB said the capital increase reflected the risks it was bearing on foreign exchange and gold holdings as well as on securities. But Gilles Moec, European economist at Deutsche Bank, said the announcement was a reminder that "letting the ECB fight alone" was "no free lunch".
Confirmation of the ECB's first ever general capital increase followed a scheduled ECB governing council meeting in Frankfurt but coincided with the European Union summit in Brussels focused on the eurozone debt crisis.
The capital increase, which could see national central banks' profits being paid to the ECB, will allow the ECB to increase significantly the provisions it makes in its balance sheet against possible losses.
Banks, public authorities and utilities in the 16-country eurozone will be forced to speed up their switch to a more efficient pan-European payment system after Brussels set deadlines for adopting the structure, write Nikki Tait and Ralph Atkins.
The new system, known as Sepa or the single European payments area, should make cross-border payments as quick and efficient as those done within national borders.
Credit transfers will have to be done under the new system within 12 months of a formal regulation coming into force, and direct debits within 24 months. The regulation, released in draft on Thursday, needs to be approved by the European parliament and member states, but European Union officials hope this will happen by mid-2011.
As an institution, the ECB accounts for less than 10 per cent of the balance sheet of the "euro-system" network of eurozone national central banks, which implement monetary policy. ECB operations providing liquidity to the banking system, which were hugely expanded after the Lehman Brothers collapse in September 2008, do not appear on its balance sheet. But the ECB's 2009 accounts, the latest available, show it held more than €2bn in covered bonds acquired as part of an earlier securities purchasing programme. This year's accounts are likely to show it holding a small but significant share of government bonds purchased since May, which by the end of last week were worth €72bn. No details are given but most are likely to have been issued by the Portuguese, Irish and Greek governments. -PB News
KARACHI: Lawyer of Dr. Aafia Siddiqui, Tina Forster, addresses a press conference at Karachi Press Club. Sister of Dr. Aafia, Dr. Fauzia Siddiqui, is also present on the occasion. -Online