miércoles, 5 de septiembre de 2012

For Spain, The Beginning Of The End Arrives As Bank Of Spain Starts Using ELA

As we described in detail yesterday, things are going from worse to worserer as the problems in Spain - more specifically in its banking sector - are deepening as deposit flight accelerates. As the WSJ notes PIMCOs' comment: "A bank 'jog' is happening in Spain - the private sector is leaving the banking system." But the Bank of Spain isn't leaving anything to chance. The WSJ disconcertingly highlights that last month the central bank appears for the first time to have activated an emergency lending program that will enable its banks to borrow from the Bank of Spain directly, bypassing the ECB's relatively tough collateral demands.
The so-called Emergency Liquidity Assistance program is shrouded in secrecy, and the Bank of Spain won't confirm that it has been used. The Bank of Spain appears to have doled out about EUR400mm under the program, based on publicly available data. That would make Spain at least the fourth euro-zone country - following Greece, Ireland and Portugal - to use the ELA, which generally is reserved for situations when banks have exhausted all other financing options.
As we pointed out yesterday, this would appear to confirm a "full-blown bailout" is imminent, as the collateral problems mount.

and The Bank of Spain was quick to respond to this reality (with a denial):
Bank of Spain comments in e-mailed statement on WSJ report that central bank provided ELA to lenders:

Sept. 5 (Bloomberg) -- Bank of Spain says “liquidity provision to banks other than ordinary monetary policy operations represents an insignificant fraction of total lending by the Bank of Spain to financial system.”

Measures adopted to lift restrictions on interest rates on deposits is not aimed at helping banks attract deposits, central bank says