European Central Bank President Visits Council on Foreign Relations

The following is an article on European Central Bank exposure to Greek bonds. This is not big news – everyone knows that the ECB (and many European banks) have billions of Euros of exposure to Greek bonds.

Why have I mentioned this article? The President of the ECB gave a speech in New York City on Monday. Guess where he gave the speech? You guessed it – the Council on Foreign relations. Interesting choice of venue.

It seems that lots of prominent people find the CFR a great place to give a speech.

Still think this whole sovereign debt mess is not orchestrated? Here’s yet another subtle message by the global elite – ‘we’re still running the show’.

jg – April 28, 2010
__________________

APRIL 28, 2010

Greek Crisis Poses ECB Risk
A default would cost the central bank, which accepts sovereign debt as collateral for loans

By BRIAN BLACKSTONE

Wall St. Journal

Jean-Claude Trichet, president of the European Central Bank, spoke in New York on Monday. The ECB's balance sheet is at risk amid Greece's sovereign-debt crisis.

FRANKFURT—The European Central Bank is struggling to limit the fallout from Greece's debt crisis on European financial institutions as it confronts a fresh problem closer to home: its own balance sheet.

Greek and other European banks likely have posted billions of euros in Greek government bonds and other securities as collateral for ECB loans. The central bank, which has largely replaced the private market as a source of funding for Greece, could face losses on its loan portfolio if Greek financial institutions fail and Athens defaults, analysts say.

That, in turn, could further dent confidence in the euro as well as investors' faith in the ECB's ability to manage the crisis.

"They need to protect their balance sheet" by demanding more collateral if necessary, "but the shock that this would send would amplify the pressure to the (Greek) banks," says Jacques Cailloux, an economist at Royal Bank of Scotland.

The ECB, which doesn't disclose how much Greek government debt it has accepted as collateral, has proved nimble in adjusting its rules in recent months. Many ECB watchers say it would find a way to keep credit flowing to Greek banks even if Athens edges closer to default, by further easing its collateral rules or going back to longer-term financing for banks.

Greek banks aren't the only ones at risk. French banks have nearly $80 billion in exposure to Greece, followed by Germany at $45 billion, according to the Bank for International Settlements. Within Germany, Hypo Real Estate has the largest exposure at €9.1 billion. Commerzbank holds €4.6 billion in Greek bonds, according to Germany's bank regulator, while public-sector banks known as Landesbanken hold billions of euros in Greek bonds.

Under ECB rules, if the collateral a bank posts for a loan loses value, the borrowing institution may be required to post more collateral. Such a demand by the ECB could exert even more stress on the weakest banks the ECB is trying to protect, however, raising questions as to whether it would take such a step in an extreme case.