This Is The Report That Might Be Freaking Everyone Out About Europe Right Now

A little headline might be the cause of a steep drop in the euro recently, courtesy of the European Central Bank’s latest weekly statement.

It’s all about the money central banks are borrowing from the ECB and how they’re going about it.

Essentially, the thinking goes that a large European bank is no longer capable of borrowing directly from the ECB because it no longer has creditworthy collateral. Instead this bank has been forced to borrow from the Emergency Liquidity Assistance Program, which allows commercial banks without collateral  to access money through domestic central banks.

CNBC’s John Carney notes that the amount of money the ECB is lending to banks via long-term refinancing operation decreased significantly over the time period, by about €21 billion.

Bloomberg’s Linda Yueh pointed out that the €34 billion weekly increase on “other claims on euro area credit institutions” probably indicates that lending from the ELA.

The ECB’s financial statements are always a little bit murky, so it might be wise to take this with a grain of salt. That said, this does not bode well for struggling European banks.

From the ECB’s financial statement for the week ending May 25:

financial statement

Photo: European Central Bank

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