FRANKFURT (MNI) – The Irish Finance Ministry, in response to
concerns voiced by the European Central Bank late last week, stressed
that neither the ECB, nor any national central bank would be “exposed
financially” by Ireland’s recently announced Credit Institution
Stabilisation Bill.

“In view of the framework for the exercise of the Minister’s powers
under the Bill, there is no question of the Central Bank, ECB or any NCB
as creditors to the guaranteed institutions being exposed financially by
the exercise of the Minister’s powers under the Bill,” a ministry
spokesperson said in a statement released on Monday.

The spokesperson also stressed that it was “inconceivable” that the
Finance Minister “would make specific directions or implement specific
asset transfers unless these were supported by the Central Bank.”

“Indeed it is very difficult to see how such measures could be
designed and executed without the intimate involvement and very close
engagement with the Central Bank.”

The statement issued by the Finance Ministry follows one published
by the ECB, outlining its “serious concerns” that the legislation for
the Irish bank rescue could weaken the ECB’s rights with regard to
collateral posted with the Eurosystem against liquidity.

In particular, the central bank warned that the draft law for the
Irish credit institutions’ stabilization bill may weaken its rights over
collateral provided under emergency liquidity assistance.

“The ECB has serious concerns” over the impact of the draft law on
“the rights of the Central Bank, the ECB and possibly other central
banks within the ESCB, the scope of collateral rights of central banks
given as security against emergency liquidity assistance, as well as
other issues,” the central bank said.

The warning highlights rising ECB concern over mounting risks it is
taking on its balance sheet in its fight against the Eurozone’s debt
crisis.

To boost its financial strength in the face of increased risks
stemming from the liquidity operations, as well as from sovereign bonds
buys and more general market volatility, the central bank on Thursday
announced its first-ever general capital increase by E5 billion to
E10.76 billion.

— Frankfurt bureau: +49-69-720-142; email:frankfurt@marketnews.com —

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