Public funding of failing banks in the European Union (LBF vol. 19) 2020/2.6.1.3:2.6.1.3 Central bank support

Public funding of failing banks in the European Union (LBF vol. 19) 2020/2.6.1.3

2.6.1.3 Central bank support

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Beyond general refinancing interventions, which are classified as monetary operations and seek to accommodate the liquidity needs of the banking system as a whole, national central banks of the Member States may also provide lending of last resort to banks on an individual basis, so called ELA.1 The objective of ELA is to avoid a bank slipping into an insolvency situation because of a liquidity gap, creating a domino effect resulting in many insolvencies.2 ELA concerns the provision of central bank money and/or any other assistance that may lead to an increase in central bank money to banks or banking groups faced with temporary liquidity problems.3

ELA to banks established in Eurozone Member States was repeat edly granted during the GFC, but also thereafter: in the 2010-2013 period by Ireland, Greece, and Cyprus, in 2014 by Portugal, and in 2015 again by Greece.4

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