Remember all those lectures from central banks on over-leveraged banking institutions?
Turns out the ECB is levered more than even the riskiest hedge fund.
It has only EUR 5.8 bln in capital and is apparently seeking to double that amount, according to a Reuters headline.
Any capital hike would be phased in over time.
The ECB’s balance sheet is EUR 1.924 trillion.
Since they pretty much create money out of the clear blue sky, you don’t spend much time thinking about how thinly capitalized central banks are. Considering they are buying ever-longer dated securities, perhaps its time we give it some thought….
With a EUR 72 bln bond book, the ECB must be getting a bit concerned it could be whipped out if the poop hits the fan again…
I wonder how much capital the Fed has?
UPDATE: The Fed has $56.8 bln, according to Wikipedia…
