ECB to double capital
(18 December 2010 – Europe) The European Central Bank has declared it will nearly double its subscribed capital by 2013, as greater volatility in the financial markets creates future uncertainties.
In a statement the central bank announced it would increase its subscribed capital by nearly €5 billion (A$6.64 billion) to €10.76 in three stages over the following two years.
'The capital increase was deemed appropriate in view of increased volatility in foreign exchange rates, interest rates and gold prices as well as credit risk,' it said.
Economists have said that exceptional measures over the past few years, including massive loans to commercial banks, and the purchase of corporate and sovereign bonds, has led to the level of risk the ECB has been burdened with to increase.
The bank will also be able to raise provisions against losses by an equal amount, 'starting with the allocation of part of this year's profits', which will provide an extra safety cushion.
The increase was 'motivated by the need to provide an adequate capital base in a financial system that has grown considerably', the statement said.
Following an initial increase in contributions by members of the European System of Central Banks on December 29, two more instalments are to be paid at the end of 2011 and 2012, the bank said.
'The capital increase was deemed appropriate in view of increased volatility in foreign exchange rates, interest rates and gold prices as well as credit risk,' it said.
Economists have said that exceptional measures over the past few years, including massive loans to commercial banks, and the purchase of corporate and sovereign bonds, has led to the level of risk the ECB has been burdened with to increase.
The bank will also be able to raise provisions against losses by an equal amount, 'starting with the allocation of part of this year's profits', which will provide an extra safety cushion.
The increase was 'motivated by the need to provide an adequate capital base in a financial system that has grown considerably', the statement said.
Following an initial increase in contributions by members of the European System of Central Banks on December 29, two more instalments are to be paid at the end of 2011 and 2012, the bank said.
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