A hat tip to eurozone blogging maestro Edward Hugh for drawing our attention to the following extracts of the ECB’s opinion on the emergency stabilisation of credit institutions, dated December 17 — which outlines the ECB’s position on the prohibition of monetary financing by the Bank of Ireland (and other member banks):
This provision should also specify that nothing in the draft law will prejudice the compliance by the Central Bank with the prohibition on monetary financing under Article 123 of the Treaty13.
The monetary financing prohibition in Article 123 of the Treaty is further clarified in Council Regulation (EC) No 3603/93 of 13 December 1993 specifying definitions for the application of prohibitions in Article 104 and 104b(1) of the Treaty (OJ L 332, 31.12.1993, p. 1) according to which overdraft facilities or any other type of credit facility with the ECB or the national central banks (NCBs) of Member States in favour of Community institutions or bodies, central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of Member States are prohibited, as is any purchase directly from these public sector entities by the ECB or NCBs of debt instruments.
In other words, providing that the Central Bank of Ireland is not buying debt directly from government or quasi-government institutions — it is perfectly able to buy debt or create overdraft facilities for private credit institutions.
And if you dig deeper into Article 123 of the Lisbon Treaty you also get this point:
Paragraph 1 shall not apply to publicly owned credit institutions
which, in the context of the supply of reserves by central banks, shall be given the same treatment by national central banks and the European Central Bank as private credit institutions.