LIMASSOL, Cyprus (MNI) – A Greek debt restructuring would have an
impact on the ability of the European Central Bank to conduct its normal
refinancing operations, Governing Council member Nout Wellink said

Speaking during a panel discussion on financial stability, the head
of the Dutch National Bank said that “in case of a very substantial
haircut” on Greek debt in the context of a restructuring, there might be
“an impact of course on the volume of collateral the Greek banks would

“And having said that, you all know that in our operations, our
refinancing operations, we need sound counterparties,” he observed. “And
Greek banks might be impacted by a restructuring, and it might be that
under those circumstances it might be necessary to recapitalize them.”

Wellink continued: “But from the perspective of the ECB we need
sound counterparties and adequate collateral…Insofar as a
restructuring has an impact on these two…it has an impact on the
operations of the ECB, that is self-evident.”

His remarks would seem to support statements from ECB Executive
Board members Juergen Stark and Lorenzo Bini Smaghi to the effect that a
Greek debt restructuring would disqualify Greek bonds as collateral in
ECB refinancing operations, essentially preventing Greek banks from

According to Wellink, “the world economy has come back on track,
perhaps with some hiccups, but in spite of that there are still major

Although “on the one hand the global economy is doing better,” he
said, “under the surface we see a very fragile financial system,
especially in Europe.”

An “extremely important lesson” from the financial crisis is that
there should be enhanced buffers in the system, Wellink argued. He
added: “Increasing the capital in the system substantially reduces the
probability of bankruptcies and therefore the probability of financial
crisis, especially…in a world where there are so many uncertainties.”

“My feeling is that the world has become even more volatile than in
the past,” Wellink explained. “It is a very uncertain world, that’s why
I’m saying we need capital buffers…because crises are extremely

A further lesson from the crisis is to minimize the procyclicality
of the system, Wellink said. It is of “critical importance” for
regulators “to be ahead of the curve.”

–Frankfurt bureau tel.: +49-69-720142. Email:

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