Still, strict rules govern this process. The bank in question must be solvent. And if the loans surpass 2 billion euros, or $2.56 billion, the E.C.B. reserves the right to refuse additional requests for money. The methodology for valuing the collateral used to secure the credit also has to be disclosed.
Fearing possible contagion if the bank failed, the E.C.B.'s governing council, a decision-making arm consisting of 24 members, had approved an emergency loan request by one its members, the Central Bank of Cyprus, in late 2011.
As 2013 approached, the short-term loans to Cyprus Popular Bank had grown to €9 billion, about two thirds the size of the Cypriot economy, and Jens Weidmann, the hawkish head of the German Bundesbank, had begun to forcefully argue that this exposure was too large, according to the minutes of governing council meetings.
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By approving the loans — which were disbursed by the central bank of Cyprus — Mr. Weidmann said that the E.C.B. was violating a core tenet. That rule holds that banks on the verge of failure should not be bailed out with additional loans.
"It was not the governing council's job to keep afloat banks that were awaiting recapitalization and were not currently solvent," he said at a meeting in December 2012, according to internal documents from the bank.
In a statement, the E.C.B. said the following;
The E.C.B. neither provides nor approves emergency liquidity assistance. It is the national central bank, in this case the Central Bank of Cyprus, that provides E.L.A. to an institution that it judges to be solvent at its own risks and under its own terms and conditions.
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In this specific case, there was full consensus in the governing council on the need to get assurances from the Central Bank of Cyprus that this bank was solvent. The solvency was confirmed explicitly by the Central Bank of Cyprus, which also confirmed the proper valuation of collateral after an intense dialogue between it and the E.C.B.
The E.C.B. was not the supervisor and fully relied on the assessment of the Central Bank of Cyprus. Therefore to draw conclusions about the E.C.B.'s future banking supervision role on the basis of E.L.A. to Cyprus is tendentious.
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Unlike the Federal Reserve and the Bank of England, which release the minutes of rate-setting meetings in a matter of weeks, the E.C.B. decrees that its internal deliberations must be kept under wraps for 30 years.
The concern has been that the airing of these discussions would reveal national strains and weaken the E.C.B.'s federal mandate. The governing council consists of the heads of the 18 central banks that make up the currency union and a six-member executive board over which Mario Draghi presides.
The New York Times has reviewed governing council minutes dating from May 2012 to January 2013 — just two months before the controversial Cyprus bailout.