Further clarifications of Banco de Portugal in regard to the ECB’s decision on BANIF
Following news published today on the decision made by the European Central Bank (ECB) on
16 December 2016, Banco de Portugal has sent to the Parliamentary Committee of Inquiry a
technical note on the Bank’s information obligations, complementing the clarification sent
yesterday on the release of ECB, SSM and EBA documents to the BANIF Parliamentary
Committee of Inquiry (PCI).
1. The successive loss of deposits, which made BANIF’s liquidity position even more fragile
from October 2015, worsened considerably at the start of the week of 14 December 2015,
with withdrawals to the amount of €189 million and €328 million having been recorded on
14 December and 15 December respectively. As at 15 December the net accumulated loss
of deposits in BANIF since 15 October amounted to €726 million.
2. In practice, from the start of that week BANIF was already prevented from increasing
recourse to the ECB monetary policy operations, i.e. to Eurosystem funding, due to the
depletion of the collateral needed as counterparty for such funding, in accordance with
the Eurosystem’s eligibility requirements. BANIF’s inability to mobilise additional eligible
collateral, although with no impact on the previous operations, led to a situation that
actually ruled out new funding through Eurosystem monetary policy operations. It was
precisely this unavailability of eligible collateral for Eurosystem funding operations that led
BANIF to request emergency liquidity assistance (ELA) from Banco de Portugal, which has a
penalising interest rate in relation to that of monetary policy operations.
3. Immediate liquidity needs were met by the credit granted by Banco de Portugal to
BANIF on 15 December to an amount of €300 million, under the rules applicable to the
provision of ELA (https://www.ecb.europa.eu/mopo/ela/html/index.en.html). ELA operations
are the exclusive responsibility of the national central bank and are not part of the
Eurosystem’s monetary policy operations, although they are under the control of the
Governing Council of the ECB. This control is a task falling within the framework of the
ECB’s monetary policy and requires information on the provision of ELA by the national
central banks to be reported.
4. Pursuant to the rules governing the ECB’s control of ELA provided up to €500 million,
“NCBs inform the ECB of the details of any ELA operation, at the latest, within two business
days after the operation was carried out”. In compliance with this rule, the Governor of
Banco de Portugal informed the President of the ECB on 16 December about the terms
and conditions of the ELA operation of 15 December regarding BANIF. At the same time,
the Governor highlighted the importance of continuing to support BANIF’s liquidity and
communicated the possible need to increase the amount of the emergency operation on
that same day and the following days. The provision or renovation of ELAs exceeding a
specific amount depends on a decision of the Governing Council of the ECB, which
reassesses operations and sets thresholds for ELAs during the period needed for
substantive decision-making. With regard to BANIF, Banco de Portugal’s proposal aimed to
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ensure the amount of liquidity-providing operations by setting a threshold equal to the
maximum amount of eligible collateral.
5. The assessment made at the Governing Council’s meeting on 16 December of BANIF’s
position as a counterparty to Eurosystem operations is part of the ECB’s tasks as monetary
authority. Any difficulties shown by a counterparty may lead to one of the following three
decisions by the ECB: freezing (limitation) of the amount of Eurosystem funding,
suspension of access to monetary policy operations, or exclusion of the counterparty’s
access to Eurosystem operations. The two latter decisions result in an obligation to
reimburse all credits previously granted by the Eurosystem.
6. The decision to freeze BANIF’s debtor position towards the Eurosystem was put forward
by Banco de Portugal, based on the criteria already described in the note sent yesterday to
the Parliamentary Committee of Inquiry. That measure reflected the actual situation of
BANIF’s relationship with Eurosystem operations, and did not require the reimbursement
of earlier funding. Therefore, this solution did not in any way aggravate BANIF’s liquidity
situation. BANIF’s liquidity situation was already dependent on emergency assistance by
Banco de Portugal, and could not benefit from new Eurosystem operations.
7. The proposal put forward by Banco de Portugal to the ECB on 16 December was,
therefore, absolutely neutral for BANIF’s liquidity situation, and was not liable to influence
or affect the measures being considered and the decisions taken subsequently. In addition,
the proposal put forward by Banco de Portugal, while seeking to avoid the suspension of
BANIF’s access to monetary policy operations, prevented the balance of these operations
from being carried forward to ELA operations, thereby reducing the risk that the balance
of ELA operations would reach the threshold above which their concession would require
non-objection from the Governing Council.
8. BANIF’s liquidity position had been increasingly weakened by the incessant outflow of
deposits. In addition, BANIF also had a low level of eligible collateral available for ELA
operations. Due to the above, Banco de Portugal had cause to analyse alternative
proposals for BANIF’s liquidity shortages, including State-guaranteed credit lines. This was
the alternative discussed with the Ministry of Finance on 15 December.
9. The Governing Council members cannot, in compliance with the regulations set out in
the European System of Central Banks and with their code of conduct, divulge to or discuss
with national authorities in advance any matters to be decided by the Council, namely
those related to the exercise of the ECB mandate in fields involving monetary policy.
10. The confidentiality of the preparatory documents and proposals to be discussed at the
Council is a sine qua non condition of the independence principle set out in Article 130 of
the Treaty on the Functioning of the European Union, which establishes that “(…), neither
the European Central Bank, nor a national central bank, nor any member of their decisionmaking bodies shall seek or take instructions from Union institutions, bodies, offices or
agencies, from any government of a Member State or from any other body. The Union
institutions, bodies, offices or agencies and the governments of the Member States
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undertake to respect this principle and not to seek to influence the members of the
decision-making bodies of the European Central Bank or of the national central banks in
the performance of their tasks”.
11. The dissemination of preparatory items of the meetings would, by definition, open the
way to possible external pressures and create an obvious risk for the decision-making
process of the Council and the independence of its members. Simultaneously, it would
create the risk of dissemination of information to the market, given the sensitivity of the
decisions taken by the ECB in the monetary policy field.
12. For all the above reasons, only the Governing Council of the ECB, in line with the
provisions of Decision ECB/2004/3 of 4 March 2004, may define the conditions and limits
according to which the outcome of its deliberations is made public. Even these exceptions,
however, can only be opened after the decision has been taken by the Council, and not
before.
Lisbon, 15 April 2016
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