European Central Bank capital

Some has asked how much the UK has at risk in the ECB. The UK’s shareholding is only 3.75% paid, so it works out at around Euro 55m or under 0.5% of the Bank’s capital. In contrast Germany has subscribed almost Euro 2bn or around 18%.

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12 Comments

  1. ian wragg
    Posted January 24, 2015 at 6:27 pm | Permalink

    How much exposure does the UK have to Greek debt if they default. I assume we gave the IMF a wedge which they passed on to the corrupt Greeks.

    • Mitchel
      Posted January 26, 2015 at 10:06 am | Permalink

      …and how much exposure to Ukraine via its IMF and EU loans,with 10s of billions more needed over the next few years to prevent otherwise certain default?

  2. Nick
    Posted January 24, 2015 at 6:54 pm | Permalink

    There’s a difference between shareholding and exposure to loss

  3. Lifelogic
    Posted January 24, 2015 at 7:55 pm | Permalink

    Why on earth did the UK subscribe at all to ECB? Why did we give soft loans to the IMF and the PIGS? What on earth do we want with 3.75% of this absurd construction. Mind you I suppose they would only have wasted it on some other complete nonsense, perhaps wind or PV grants, propaganda, the jumped up school sport day that was the Olympics, more damaging wars, aircraft carriers without aircraft or other silly grants for at best half developed electric cars, that cannot even drive from London to Manchester. That or perhaps more of their damaging road blocking activities.

    • Richard1
      Posted January 24, 2015 at 11:06 pm | Permalink

      Do we read correctly that in order to hit the target of spending 0.7% of GDP on overseas aid the UK govt will increase spending on overseas aid this year by 30% and the dept is in a rush to deploy the funds? If so this policy is profoundly immoral as well as economically foolish both for us in the UK and for recipient countries.

    • Denis Cooper
      Posted January 25, 2015 at 10:07 am | Permalink

      For clarity it’s 3.75% of the UK’s capital key, which is itself 13.7%:

      https://www.ecb.europa.eu/ecb/orga/capital/html/index.en.html

      and that’s why it’s only 0.5% of the subscribed capital.

      We subscribe to the ECB because we are in the EU and we are expected to join the euro in due course, just like all other EU member states which are not yet in the euro are expected to join the euro in due course; and the fact that Major agreed to this arrangement being put into the Maastricht Treaty itself says something about where he really wanted us to end up, notwithstanding the political necessity of getting a UK “opt-out” written into the treaty as a temporary expedient to get it approved by Parliament without completely destroying the Tory party.

  4. Richard1
    Posted January 24, 2015 at 7:55 pm | Permalink

    Although it it is clear the euro project is turning out to be a disaster for many countries we should remember that the problems in Greece Portugal Spain etc were not caused by the euro but by govt policies in those countries – spending too much money and not implementing supply inside structural reforms. What the euro has done is disguise the underlying problems and enabled a postponement of the day of reckoning by enabling borrowing at much lower rates than would otherwise have been possible. It would be best if Greece and a few other countries could leave the eurozone, although that would mean big losses in the banking system, particularly for German banks. We should remember this when we hear bankers such as Ms Botin of Santander applaud QE – its very much in their interests to avoid a grand reckoning.

    The reality is we just don’t know how all this will play out. The Conservative policy of renegotiation with a referendum backstop allows us to try to cut a better deal for the UK, and to take a view in 3 years and does therefore seem to be the best option.

  5. Aatif Ahmad
    Posted January 24, 2015 at 10:27 pm | Permalink

    It is not just the subscribed capital that is at risk. A central bank can become balance sheet insolvent where it suffers serious losses on its assets (ie the sovereign bonds). If the ECB similarly incurs large losses on its bond portfolio it would have to be recapitalised by its shareholders, so if it suffers a loss of say E3 trillion the UK will be on the hook for c. E120 billion.

    Reply 0.5% of E3tn is 15bn.They are only buying 1.1tn in total so worst cases losses would be much much lower

    • acorn
      Posted January 25, 2015 at 4:52 pm | Permalink

      The ECB can never be insolvent in the Euro currency. It is the issuer of the Euro currency on behalf of the 19 member state Treasuries and their Central Banks. You can’t get Euros from anywhere other than the ECB.

  6. ian
    Posted January 25, 2015 at 3:41 am | Permalink

    You have already set the country up for bail-in of peoples bank account and that is when your chess game come to a end. You can talk all you want, your on the road to destruction just like Greece, thousands die and will continue to die so they can think of themselves as being part of Germany. This is the third world war on the people of the world, it will make world war two look like a side show as politician and bankers around the world try keep themselves and the rich and powerful at the top which is a waste of time, they are like frighten children lashing out at the people for no good reason going from one five star haunt to the next. It is them that owe all the money, i hear them say i am worth 200 million but they don”t tell you that they owe 160 million, some owe more than they worth but bankers keep them going. One big hit on deflation and they will be gone and the best is they can not stop it, it the way of the universe, check and balances the old game of what go up must come down. There is another thing you can not beat, social mood.

    Since the 2000 stock market crash which a lot of them have still not recovered from, million of people have died in the ME and other places, take Greece tens of thousands have died, no drugs or operation taking of their own lives, even thousands here. Of cos it will go down in history and you might get a mention weather good or bad.

    Last chance saloon

  7. oldtimer
    Posted January 25, 2015 at 10:19 am | Permalink

    That is 55 euros too much.

    • oldtimer
      Posted January 25, 2015 at 10:20 am | Permalink

      Correction: that should be 55 million euros!

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    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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