ECB wants changes to bill tack­ling bank­ing cri­sis

The Pak Banker - - Company & Boss News -

LONDON: The Euro­pean Cen­tral Bank (ECB) wants the Govern­ment to change leg­is­la­tion that gives the Min­is­ter for Fi­nance broad pow­ers to in­ter­vene in the bank­ing sec­tor.

The ECB, one of the three in­sti­tu­tions back­ing the €85 bil­lion bailout agreed with the Govern­ment last month, has crit­i­cised the Credit In­sti­tu­tions (Sta­bil­i­sa­tion) Bill, which is de­signed to give the Govern­ment the pow­ers it needs to tackle the two-year-old bank­ing cri­sis.

The ECB has pub­lished a le­gal opin­ion which states that it fears the law as it stands could usurp its rights over col­lat­eral given as se­cu­rity for liq­uid­ity it has pro­vided to Ir­ish banks, which owe it €136 bil­lion.

The ECB would not com­ment be­yond the le­gal opin­ion yes­ter­day. How­ever, sources close to the in­sti­tu­tion, which is the cen­tral bank for the euro zone, in­clud­ing the Re­pub­lic, ex­pect the Govern­ment to take no­tice of what it is say­ing.

The sources pointed out that the ECB ex­pects the Govern­ment to deal with its con­cerns, which ef­fec­tively means mod­i­fy­ing the leg­is­la­tion in such a way as to take these is­sues into ac­count.

The Bill is un­der fire on two fronts. Pres­i­dent Mary McAleese will con­sult with the Coun­cil of State on its Ir­ish con­sti­tu­tional im­pli­ca­tions to­day. She has un­til Thurs­day to de­cide whether or not to re­fer it to the Supreme Court to test whether or not it com­plies with the Con­sti­tu­tion.

The ECB's opin­ion, signed by its pres­i­dent, Jean-Claude Trichet, sin­gles out sec­tion 61 of the Bill, which it crit­i­cises for be­ing legally un­cer­tain, and ar­gues that it could have an im­pact on the rights of the Cen­tral Bank, the ECB and other cen­tral banks in the euro zone. The sec­tion deals with the im­pact that or­ders made by the Min­is­ter for Fi­nance un­der the leg­is­la­tion could have on obli­ga­tions of the Ir­ish banks to other fi­nan­cial in­sti­tu­tions or par­ties.

The doc­u­ment warns that this sec­tion should not limit the abil­ity of the ECB or the Ir­ish Cen­tral Bank to "en­force their rights in­clud­ing, with­out lim­i­ta­tion, the en­force­ment of se­cu­rity over any el­i­gi­ble col­lat­eral posted by any rel­e­vant in­sti­tu­tions". It adds that the law needs to clar­ify this and points out that an ear­lier draft of the Bill, which the ECB was given on De­cem­ber 11th, specif­i­cally states that the leg­is­la­tion will not af­fect the ECB's rights or those of the Ir­ish Cen­tral Bank.

The Depart­ment of Fi­nance said yes­ter­day there was no ques­tion that the Min­is­ter would ex­pose the ECB or the Ir­ish, or any cen­tral bank, to any fi­nan­cial risk when ex­er­cis­ing his pow­ers un­der the leg­is­la­tion.

Pres­i­dent McAleese has not spec­i­fied what her con­cerns are in re­la­tion to the leg­is­la­tion. She has the power to re­fer any Bill to the Supreme Court if she be­lieves that part or all of the leg­is­la­tion in ques­tion may be con­trary to the Con­sti­tu­tion.

Once she has con­sulted with the coun­cil of state, the pres­i­dent has ab­so­lute dis­cre­tion over whether or not to re­fer the leg­is­la­tion to the Supreme Court, which will then hold a for­mal hear­ing to test the law's con­sti­tu­tion­al­ity. -PB News

LA­HORE: A view of polo match played at La­hore Polo Club for fund rais­ing to the flood af­fectees. The match was spon­sored by Bank Alfalah. -PB photo

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