The ECB Suddenly Has A Huge Headache On Its Hands…” Translated: dear Eurosystem members: we need more cash.”

Sunday, June 28, 2015
By Paul Martin

by Tyler Durden

Last week we reported that as a result of the relentless surge in the Greek deposit flight, which may finally end tonight if, as now appears almost certain, the Greek government imposes capital controls, the ECB’s claims on the Greek banking system have now surpassed the total amount of Greek deposits…

We previously explained that on the surface, this is terrible news for Greece as it implies that the moment the last linkage between the ECB and Greece is severed, Greek deposits will have to undergo a massive haircut as without ECB liquidity backstop funding the banks at ridiculously small haircuts on what is essentially worthless collateral, the Cyprus “Plan B” will be immediately imposed.

However, a quick glance at a different balance sheet reveals that a full-blown Grexit with all bridges burned between Greece and its former “irreversible monetary union” implies someone else may have an even greater headache on their hands. The balance sheet in question: that of the Eurosystem in general, and the ECB – which is the anchor behind the Eurosystem and the Eurozone’s official monetary authority – in particular.

The chart below compares total ECB claims to Greek banks (excluding SMP purchases of Greek bonds) side by side with the latest total Capital and Reserves of the Eurosystem as of June 19.

The Rest…HERE

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