Ireland: Anglo Irish Bank Emergency Liquidity Assistance, 2009

Emergency liquidity assistance (sometimes referred to by the CBI as “exceptional liquidity assistance”) can be used by a Eurosystem national central bank, such as the CBI, to assist solvent financial institution that do not have collateral eligible for normal Eurosystem monetary policy operations (ECB 2013). This ELA is distinct from the funding operations carried out for monetary policy implementation through the ECB (CBI 2011).

Because of persistent challenges in funding markets and the decline in deposit funding, Anglo’s borrowing from the ECB and CBI increased to EUR 23.5 billion by March 2009 (Anglo 2010; EC 2009). Anglo also received EUR 11.5 billion in emergency liquidity from the CBI, by providing collateral that did not qualify for standard Eurosystem monetary operations (Whelan 2012).

Anglo was offered ELA in 2008 because of fears that its funding difficulties would spill over through contagion to other large banks, leading to a sustained economy-wide disruption in Ireland. The initial purpose of the ELA was to “buy time,” owing to the systemic importance of Anglo and its similarity to the rest of the Irish banking system (Honohan 2010, 131). Following the announcement of the blanket guarantee in September 2008, the broader Irish financial system experienced a strong resurgence in liquidity. However, Anglo was unable to recover all of its lost deposit funding (Nyberg 2011).

Anglo received a recapitalization of EUR 4 billion from the Irish authorities as a step toward ensuring its long-term viability in May 2009 (Baudino, Murphy, and Svoronos 2020; EC 2009). In late May 2009, the financial regulator allowed Anglo to temporarily suspend capital requirements following the initial capital injection by the government. The state’s capital injection was carried out as a “temporary urgent relief” to allow time to begin restructuring the bank to restore long term viability or to move toward a potential liquidation (EC 2009, 14).

Through 2010, Anglo received EUR 25.3 billion in additional capital in the form of PNs (a type of government liability), which it could use as collateral for loans from the CBI under the ELA facility. Anglo’s borrowing under the emergency facility increased to EUR 28.1 billion in four tranches by the end of December 2010, mostly backed by the PNs as collateral (See footnote 8) (Baudino, Murphy, and Svoronos 2020).

Former CBI Governor John Hurley stated to a joint parliamentary inquiry, that the CBI provided emergency liquidity only to banks based on a determination of solvency by the financial regulator. David Doyle, the former secretary general of the DoF, also stated that there was a concern that Anglo’s “illiquidity would rapidly become insolvency” (Houses of the Oireachtas 2016, 262).

The ECB’s rules at the time stated that ELA could be used for a solvent but illiquid credit institution which did not have sufficient collateral to use for normal ECB lending operations. To determine an institution as systemically important, the CBI could have used three criteria: size, interconnectedness, and substitutability. Anglo likely did not satisfy the size and substitutability criteria, but its interconnectedness could have justified it being regarded as a systemically important institution. Anglo’s collapse would have put additional funding pressure on Irish banks due to threats of contagion and common implicit reliance on the Irish state for emergency funding (Honohan 2010). (For more details, see Key Design Decision No. 7, Source and Size of Funding.) 

Anglo’s ELA involved a varying combination of three different contractual arrangements:

• Master Loan Repurchase Agreement (MLRA);
• Special Master Repurchase Agreement (SMRA); and
• Facility Deed (Anglo 2011).

The majority of the funds provided to Anglo were through the SMRA, including the sale and repurchase of PNs (Anglo 2011).

Anglo was merged with INBS to create a new entity called IBRC in July 2011 (Tynan 2020). The outstanding ELA obligations of the merged entity resulted in the collateral’s being seized by the CBI and exchanged with other marketable assets when IBRC was liquidated in February 2013 (Baudino, Murphy, and Svoronos 2020).

At the time of its liquidation in 2013, IBRC’s total borrowings under the ELA facility were roughly EUR 40 billion (Baudino, Murphy, and Svoronos 2020). That included roughly EUR 25 billion outstanding under the SMRA and EUR 15 billion outstanding under the Facility Deed (Houses of the Oireachtas 2013).

Ireland implemented a blanket guarantee of EUR 400 billion covering most deposits and liabilities of six Irish banks in September 2008 (Schaefer-Brown 2022; Tynan 2020). Anglo received two standby liquidity facilities of EUR 3 billion from the CBI and EUR 10 billion from Ireland’s largest commercial banks (Honohan 2010, 124). Anglo never accessed those facilities because deposits temporarily recovered following the government guarantee announcement.

Anglo was one of the six core banks covered under the Irish Guarantee Scheme for financial institutions adopted under the Credit Institutions (Financial Support) Act, 2008 on October 2, 2008, to maintain the stability of the financial system in Ireland. The guarantee plan would be effective for two years, and covered liabilities of the banks incurred between September 29, 2008 and September 29, 2010.  The scheme covered the following liabilities:

• All retail and corporate deposits (to the extent not covered by existing deposit protection schemes in the State or any other jurisdiction);
• Interbank deposits;
• Senior unsecured debt;
• Asset covered securities; and
• Dated subordinated debt (lower Tier 2), excluding any intragroup borrowing and any debt due to the ECB arising from Eurosystem monetary operations (EC 2008).

Anglo’s customer loans were denominated in euros, British pounds (GBP), and US Dollars, which the bank managed through foreign currency derivatives. Anglo had a EUR-GBP swap agreement in place with the CBI at a market based fee; the facility had not been used by the end of December 2010. In November 2010, the government also guaranteed payments on Anglo’s derivative positions and certain interbank transactions; this facility charged no fees (Anglo 2011).

Part of a Package (B): In January 2009, the Irish government nationalized Anglo, ultimately providing EUR 29.3 billion of capital to the bank.

Anglo was nationalized on January 21, 2009, following the signing into law of the Anglo Irish Bank Corporation Act 2009. From May 2009, the Irish authorities injected EUR 4 billion of capital in the form of ordinary shares. In 2010, the minister for finance provided Anglo additional capital by issuing PNs, eventually totalling EUR 25.3 billion, which the bank could use as collateral to receive further ELA from the central bank (Baudino, Murphy, and Svoronos 2020; EC 2009).  The EC also noted at the time of the initial capital injection that:

Part of a Package (C): The Irish government also established an asset purchase program through NAMA in December 2009.

NAMA was operational on December 21, 2009, through the enactment of the National Asset Management Agency Act 2009, with the objective of removing certain commercial property and land loans from bank balance sheets (Baudino, Murphy, and Svoronos 2020). Anglo was one of the five Irish banks that applied and were approved  for participation in the NAMA program. NAMA was instructed to calculate haircuts on the market value of the loans purchased from the banks and estimating the long-term economic value of the loans. At first, these valuations were carried out on a loan-by-loan level. The average haircut of 57% between 2010 and 2012, thereby paying EUR 31.8 billion to acquire assets with a face value of EUR 74.4 billion (Nye 2021).

NAMA ended up acquiring about EUR 14 billion in derivatives that were largely owned by Anglo for EUR 0 (Nye 2021). Anglo was able to sell EUR 34.4 billion in distressed loans at a 61% discount to NAMA by the end of 2012 (Tynan 2020). NAMA was established as a 51% privately owned entity, thereby reducing the need to add the asset management company’s liabilities to Ireland’s public debt (Baudino, Murphy, and Svoronos 2020).

Ireland’s minister for finance also used NAMA’s subsidiary, NARL, to extend a loan to IBRC to help facilitate the merger of Anglo and INBS in 2013 (Nye 2021). NARL issued new NAMA bonds to the CBI in an amount equivalent to the outstanding from the Facility Deed (IBRC 2014). At the time of IBRC’s liquidation, the outstanding EUR 15 billion to the Facility Deed was acquired by NAMA at a value of EUR 12.9 billion (Houses of the Oireachtas 2013).

The Central Bank Act 1942 (the Act) provides the statutory basis for the CBI to provide emergency liquidity against collateral to credit institutions in Ireland (Government of Ireland 2003, 10). In particular, Section 5B(d) provides the CBI with a general power to “provide loans and other kinds of financial accommodation to credit institutions and other persons on the security of such assets and on such terms and conditions as the Board [of Directors of the CBI] considers appropriate” (Government of Ireland 2003, 10). The Act also provides the CBI with the power to take action in pursuit of the financial stability objective (IMF 2016) . Section 7A of the Act, states:

A new act passed on October 2, 2008, the Credit Institutions (Financial Support) Act 2008, provided the minister for finance with the authority to provide financial support or accommodation to a specific credit institution. The minister can regulate the credit institution or its subsidiary, in exchange for providing financial support (Government of Ireland 2008). The CBI received formal confirmation from the minister for finance to be made whole for any shortfall in the liquidation of collateral provided by Anglo (CBI 2011).

As a member of the EU, Ireland must comply with the prohibition on monetary financing contained in Article 123(1) of the Treaty on the Functioning of the European Union (TFEU)^FNThe TFEU, itself based on the Treaty of Maastricht of 1992, is one of the EU’s two foundational treaties (the other being the Treaty on European Union). It sets out in detail the principles and objectives of the EU and the scope and functional responsibilities of EU institutions (the Treaty on European Union in contrast defines the EU’s purpose and lays out its institutions and form). As a technicality, before the Lisbon Treaty came into effect in 2009, TFEU Article 123 was Article 101 of the Treaty Establishing the European Community, but the content was unchanged when the Lisbon Treaty relocated the article., which reads  (emphasis added):

TFEU Article 123 prohibits the extension of liquidity to insolvent firms (at least without a state guarantee), which is considered a public undertaking (in other words, one that should be supported with state resources). While the ECB has its own implementing agreements and procedures to ensure compliance with TFEU Article 123 within the Eurosystem (see Key Design Decision No. 5, Governance), they are not legally binding;^FNThat is to say that those agreements and procedures implement EU law, but are not themselves legally enforceable. Any legal actions resulting from a violation of the monetary financing prohibition would be enforced as EU law and, in practice, the issues are raised by the European Commission. See (Arnold 2025). the monetary financing prohibition—including its application to emergency liquidity—is EU-level law, and thus applies even to those nations that are Member States of the EU but not members of the Eurosystem. For more on the application of the monetary financing prohibition to ELA, see (Arnold 2025).

Article 14.4 of the Statue of the European System of Central Banks and of the European Central Bank (ESCB) authorizes the ECB’s Governing Council to, with a two-thirds vote, prohibit the provision of emergency liquidity assistance (ELA) by a national central bank if it “[interferes] with the objectives and tasks of the ESCB” (EU 2009a). The ESCB, by virtue of being annexed (as protocol no. 4) to the TFEU in 2009,^FNBefore the Lisbon Treaty, in protocol no. 3 of the Treaty Establishing the European Community, as amended in 1997. has the same legal character as the TFEU. That is to say, although the ECB Governing Council may, from time to time, publish non-legally-binding procedural guidance, its authorization to prohibit or suspend a national central bank’s activities under Article 14.4 of the ESCB is legally binding and statutory in nature. In practice, the ECB Governing Council has cited suspected TFEU Article 123 violations when suspending ELA provision by a national cental bank, see Arnold (2025) Key Design Decision No. 5, Governance.

Anglo’s emergency liquidity was administered by the CBI throughout the duration of the facility, in line with CBI’s legal authority (CBI 2011; IMF 2016).

As a rule, national central banks are required to inform the ECB of the details of any emergency liquidity operation within two business days of the action. The ECB needs to be informed of the following for the liquidity program: the counterparty receiving funds, the duration of the loan, the total loan amount, the collateral pledged including its valuation, the haircuts applied, and the specific reasons for the provision of emergency funds (i.e., margin calls, deposit outflows, etc.). The ECB Governing Council can decide to request additional information from the central bank, or broaden the reporting requirements, and make reporting more stringent if it deems necessary (Mourmouras 2017).

More generally and despite the existence of ELA in the Eurosystem since before 2008, in October 2013, the ECB published a revised official definition and description of its procedures (Mourmouras 2017). The ECB clarified in 2013 that euro-area credit institutions can receive funds from their central banks not only through monetary policy operations, but also exceptionally through ELA. Any costs or risks arising from the provision of emergency liquidity to a solvent institution is the responsibility of the national central bank (ECB 2013).

On June 19, 2017, the ECB published a revised emergency liquidity agreement, replacing the 2013 version, with the intent of increasing transparency around the governing rules and procedures (ECB 2017b). The ECB’s latest disclosure required reporting from the national central bank, regardless of the size and nature of the emergency liquidity provision. The ECB also required periodic disclosures on the liquidity facility until the entire emergency loan is repaid. The ECB’s Governing Council can allow a national central bank to provide emergency liquidity beyond a certain ceiling within a predetermined period to avoid potential systemic implications (ECB 2017a).

Detailed procedures and legal underpinning for the emergency liquidity provision were decided by the CBI’s board in November 2007, which granted the powers to approve the emergency facility to the CBI governor. If a bank did not have eligible collateral to access the refinancing operations with the ECB, it could apply for ELA from the CBI. The CBI’s board authorized the governor and the CEO of the financial regulator to discuss solutions with the Irish government (Honohan 2010).

In Ireland, generally, the financial regulator was responsible for microprudential supervision, and the governor of the CBI was responsible for overall stability (Honohan 2010). A Financial Stability Committee comprised senior staff of the CBI and the financial regulator (Honohan 2010). The Irish government utilized the Exchequer to provide capital injections to Anglo and the National Pension Reserve Fund for the PNs to IBRC. The National Pension Reserve Fund was a sovereign wealth fund established by Ireland in the 1990s during a period of fiscal fortitude (Honohan 2012).

In line with the EU’s guidance, Ireland created the Domestic Standing Group (DSG) in July 2007 to improve cooperation among the DoF, financial regulator, and the CBI (Houses of the Oireachtas 2016; Nyberg 2011). NTMA, responsible for managing the Irish state’s funds, also attended DSG meetings during the summer of 2008. Between May and June 2008, the minister for finance met with the senior management of the NTMA to discuss the latter’s role in addressing financial stability issues. The CBI also set up a liquidity monitoring group to evaluate the needs of the banking system, along with monitoring the available collateral at banks for the ECB’s refinancing or the CBI’s emergency lending facilities. The DSG had previously discussed the creation of a special resolution regime for banks, but no progress was made due to legislative complexities. The CBI also carried out crisis management exercises, including one with the EU, using its black book manual which includes guidance on topics ranging from emergency liquidity, legal, and logistical concerns (Nyberg 2011).  Honohan has noted that this crisis manual was not relied on in practice, since the procedures were seen as “excessively cumbersome” and time consuming during the crisis (Baudino, Murphy, and Svoronos 2020). 

Analyses by PwC and Merrill Lynch were used to assess the recapitalization needs of Anglo in late 2008. Crisis management was the responsibility of the DoF and the NTMA, with the minister for finance leading the assessment of recapitalizations. Merrill Lynch had strongly advised the minister for finance in December 2008 to consider taking Anglo into state ownership (Nyberg 2011).

There was concerns of overlapping mandates between the DoF, financial regulator, and CBI. The CBI’s staff has been accused of self-censorship, which makes it harder to address financial stability issues. The EC believes that the CBI could have acted earlier to address stability concerns with individual banks by also engaging the financial regulator to conduct a deeper analysis (Nyberg 2011).

The ELA facility was subject to regular approval by the ECB’s Governing Council (Baudino, Murphy, and Svoronos 2020). By the end of 2009, the issuance of PNs to Anglo was closed by written communication between Ireland’s minister for finance, and the Competition Directorate General of the European Commission (DGCOMP) (Honohan 2012).

Pursuant to Article 14.4 of the ESCB, the ECB Governing Council can, with a two-thirds vote, prohibit ELA provision by a national central bank (see Key Design Decision No. 3, Legal Authority). During the Global Financial Crisis and the European Sovereign Debt Crisis, the ECB Governing Council made that determination, variously suspending ELA and conditioning further approval for it on policy changes in the country in question (Arnold 2025).

Although the ECB Governing Council’s ability to suspend a national central bank’s ELA existed since well before the official publication of any guidelines, the ECB began to publicize non-legally-binding guidance on its ELA expectations in 2013. At that time, it published its ELA Procedures, which outlines numerous ex post reporting requirements, including, inter alia, amount, interest rate, collateral, supervisory assessment, and motivating reason (ECB 2013). Further, if ELA exceeds EUR 500 million, the relevant national central bank must alert the ECB Governing Council as soon as possible of the extension of ELA before the fact. Under the ELA Procedures, any ELA exceeding EUR 2 billion will be automatically reviewed by the ECB Governing Council to ensure that it does not merit suspension or alteration resulting from its interference in ECB tasks and responsibilities as outlined in ESCB Article 14.4 (ECB 2013).

In 2017, the ECB published its Agreement on Emergency Liquidity Assistance, which provided further guidance on the ECB’s policies regarding ELA and replaced the earlier 2013 ELA Procedures (ECB 2017b). In the 2017 agreement, the ECB added language that clarified the limitations of the prohibition on monetary financing: “this document acknowledges that ELA must be in compliance with the prohibition of monetary financing (Art. 123 of the Treaty of the Functioning of the European Union [TFEU])” (ECB 2017a). It added further guidance to ELA procedures, requiring, inter alia, a funding plan within two months of the first extension of ELA, a letter to the president of ECB regarding the ELA if provided for more than six months, compliance with various solvency requirements, and a penalty interest rate. The ECB revised its ELA agreement in 2020 and most recently in 2024.

As such, the ECB also exercised its powers in 2010 to caution the large provision of ELA and impose Ireland to undertake structural reforms as a condition for further provision of ELA. On October 15, 2010, the president of the ECB wrote to Ireland’s minister for finance cautioning that “large scale provision of liquidity . . . to entities such as Anglo Irish Bank should not be taken for granted as a long-term solution” (Trichet 2010a). On November 19, 2010, the ECB president imposed explicit conditionality for the further provision of emergency liquidity because of its overall size. Among other measures, the Irish authorities’ request for further financial support had to include a commitment to undertake fiscal consolidation, structural reforms, and financial sector restructuring including recapitalization (Trichet 2010b).

As of 2020, the institution receiving the ELA is also expected to provide an updated funding plan on a quarterly basis, within two months following the first provision of emergency assistance, and report regulatory capital ratios on a monthly basis. If the ELA provision lasts beyond six months, the governor of the national central bank is expected to write to the president of the ECB with an exit strategy for the ELA. The ECB’s Governing Council can now impose additional restrictions on any ELA provided beyond 12 months (a provision that did not exist in the 2008 to 2013 period) (ECB 2020).

The ECB also directed national central banks to provide emergency liquidity at a rate of 100 basis points plus the Eurosystem’s marginal lending facility rate. For euro-denominated repurchase transactions, the central bank must charge a minimum rate of 1% per annum. The latest amendments prohibit monetary financing of institutions that have been deemed insolvent by national laws (ECB 2020).

Anglo disclosed the total amount of special liquidity assistance it received from the CBI in its annual and interim financial reports (Anglo 2010; Anglo 2011; IBRC 2012) but did not identify that the assistance was ELA. In its 2010 and 2011 annual reports, Anglo and IBRC, its successor company, briefly described the three different liquidity programs offered by the CBI (see Overview) (Anglo 2011). The CBI also disclosed the range of haircuts on the three liquidity facilities in the notes to account of its annual report (CBI 2011; CBI 2012; CBI 2013; CBI 2014).

The CBI itself did not disclose any emergency liquidity borrowings by Anglo or the total  Eurosystem borrowings by all six Irish banks (Baudino, Murphy, and Svoronos 2020). Communications specific to Anglo focused primarily on the blanket guarantee, capital injections, and restructuring. The CBI’s provision of the ELA facility was disclosed in the bank’s annual report in 2010, and clarified the difference from the ECB’s lending for monetary policy purposes. The CBI described the provision of liquidity to a credit institution against suitable collateral defined by the central bank. The CBI discussed that it had the backing of the minister for finance for any shortfalls from lending under the ELA facility (CBI 2011).

In January 2009, the minister for finance, after consultation with the board of Anglo, announced the decision to take the bank into public ownership through a press release. The minister announced that the Irish state was the only “available potential owner” for Anglo, and that Donal O’Connor would continue as the chair of the bank’s board (CBI 2009, 12).    

The CBI’s annual report in 2010 indicated EUR 11.5 billion in outstanding balance on the emergency liquidity loans to Anglo under the “Other Assets” line of the CBI’s balance sheet (CBI 2011). The EC noted that the Irish authorities did not expect to recover any of the capital injections provided to Anglo, which indicated the high level of distress of the bank (EC 2009).

Former CBI Governor John Hurley clarified to a joint committee that the central bank never provides emergency liquidity to an insolvent bank. The financial regulator is responsible for providing a certificate of solvency to an Irish bank. Hurley disclosed that the CBI had made EUR 3 billion in ELA available to Anglo in September 2008, at the time the government announced the blanket deposit and liability guarantee. Hurley also discussed that only about EUR 1 billion was drawn from the ELA before the guarantee was activated and the facility was deemed unnecessary (Houses of the Oireachtas 2015).

In October 2010, then-ECB President Jean-Claude Trichet wrote a letter to the Irish Minster of Finance, Brian Lenihan, warning that the “large provision of liquidity” to Anglo was not a long-term solution; he cited the concerns of the ECB’s Governing Council on providing such funding on a permanent basis (Trichet 2010a, 2). The ECB president, in a follow up letter in November 2010, stated the “[extreme] concern” of the overall credit exposure of the Eurosystem towards the Irish banking system  (Trichet 2010b, 2). The Irish authorities had to then officially request additional support from the ECB, while committing to fiscal consolidation, structural reforms, and restructuring of their banking sector (Baudino, Murphy, and Svoronos 2020). At the end of 2010, the majority of Anglo’s borrowing was under the SMRA, using PNs as collateral (Anglo 2010; Anglo 2011). The ECB’s concerns with the outsized liquidity provision to Anglo may have led to the CBI launching the Facility Deed in December 2010 (Anglo 2011). After 2010, the Facility Deed was responsible for about EUR 15 billion in incremental liquidity provision to Anglo (BOI 2012).

Anglo’s solvency in September 2008 was questioned in Ireland’s Joint Committee of Inquiry into the Banking Crisis by Brendan McDonagh, the CEO of NAMA,  and John Corrigan, the former CEO of NTMA (Houses of the Oireachtas 2016).

The ECB released a set of disclosures titled the Irish Letters in 2023, which shed light on the ECB’s involvement with regulatory decisions in relation to Anglo. On the topic of the potential bail-in of Anglo’s senior debt in 2011, the ECB expressed “the view that the Irish authorities’ decision to fully honour the outstanding senior debts of Anglo Irish Bank was the least damaging course of action to pursue” (ECB 2023, 4). The ECB believed that the potential negative spillovers of such a bail-in would impact other Irish and Eurosystem banks (ECB 2023).  

In late 2008, Anglo was initially provided standby liquidity facilities of EUR 3 billion from the CBI and EUR 10 billion from the two largest commercial banks, BOI and AIB (Honohan 2010). Former CBI Governor Hurley disclosed that Anglo had drawn up to EUR 1 billion from the standby facility before the guarantee was activated and the facility was deemed unnecessary (Houses of the Oireachtas 2015).

By March 2009, Anglo’s borrowing from central banks, including the ECB and CBI, had increased to EUR 23.5 billion from EUR 7.6 billion in September 2008 (EC 2009). Following Anglo’s nationalization, CBI agreed to provide the bank with EUR 11.5 billion in ELA against collateral that did not qualify for standard Eurosystem monetary operations (Whelan 2012). Anglo’s access to the ELA facility grew from EUR 10 billion in February 2009 to EUR 28.1 billion by the end of December 2010 (Baudino, Murphy, and Svoronos 2020). By the end of 2011, IBRC’s (Anglo’s parent entity) borrowings from the CBI’s emergency liquidity facility had increased to EUR 40.1 billion (IBRC 2012). At IBRC’s liquidation in 2013, the outstanding liquidity provision under the ELA amounted to EUR 39.5 billion (see Figure 3) (CBI 2014).

During the four years that it was active, from 2009 to 2013, Anglo’s ELA facility was provided through an evolving mix of three contractual arrangements:

• An MLRA backed by collateral from the bank’s unencumbered customer loans (Anglo 2010). The rate charged by the MLRA borrowings was set by the CBI at each rollover and was linked to the ECB’s marginal lending facility rate (Anglo 2011; Kinsella 2011). Anglo’s borrowing from the MLRA had increased to EUR 11.5 billion at the end of 2009 and appears to have been the only form of ELA outstanding for Anglo at the time (Anglo 2010).
• An SMRA, launched in 2010, backed mostly by the government promissory notes. At the end of 2010, EUR 23.5 billion in PNs from the SMRA accounted for close to 90% of Anglo’s ELA (see Figure 3) (Anglo 2010; Anglo 2011).
• A Facility Deed, launched in December 2010, was an unsecured loan facility guaranteed by the minister for finance (Anglo 2011). At the end of 2010, the combined IBRC after Anglo’s merger with INBS had EUR 10 billion outstanding under this facility, one-quarter of the total (BOI 2012). The initial term of the facility was for one month, but it was later extended to June 30, 2012. Borrowing from this facility was at EUR 14 billion at the end of 2011, before usage dropped to EUR 5 billion at the end of May 2012 (BOI 2012).

The interest rate charged by the CBI to Anglo for the emergency liquidity was linked to the ECB’s marginal lending facility rate (Anglo 2010). However, research did not uncover public information on the specific rate charged to Anglo.

Professor Karl Whelan at University College Dublin estimated that the CBI’s emergency liquidity facility charged a minimum rate equal to the Eurosystem’s marginal lending facility rate plus 100 bps (Whelan 2012).  He further estimated the rate to have averaged 3% in 2011 (Whelan 2012).   

As noted, in 2010, Anglo received EUR 25.3 billion in PNs from Irish authorities, which paid an annual interest rate of 10% (Baudino, Murphy, and Svoronos 2020). As assets on Anglo’s balance sheet, these notes were sufficiently large to ensure Anglo’s capital remained in line with regulatory requirements. Anglo also used the PNs as collateral to borrow from the CBI.

In December 2010, Anglo requested a change in the legal terms of the PNs that allowed for an interest holiday in 2011 and 2012. But the use of IFRS accounting treatment allowed Anglo to continue earning interest income on the PNs in 2011 and 2012. The floating rate NAMA bonds provided to Anglo charged interest at the six-month Euribor rate, receivable semiannually (Anglo 2011).

The Facility Deed facility was reported to charge a rate of 4.5% for providing unsecured emergency liquidity to IBRC (Anglo’s parent) in 2013 (CBI 2014).

Research did not indicate any public information on the maturities for each of the CBI’s emergency loans provided. Media reports noted that the CBI’s emergency liquidity had a maximum maturity of seven days, which can be rolled over at the CBI’s discretion (Noonan 2011). The ELA is intended to be used for a very short period (Honohan 2010).

Anglo started to use the CBI’s emergency liquidity facility in early 2009 (Anglo 2010; EC 2009). The use of the facility ended on February 7, 2013, through a collateral exchange transaction when IBRC (Anglo’s parent entity) was liquidated and CBI took ownership of all of IBRC’s assets, including the PNs (Baudino, Murphy, and Svoronos 2020). The Irish state agreed to repay Anglo’s emergency liquidity to the CBI over time (Baudino, Murphy, and Svoronos 2020). Rather than receiving cash as repayment for the ELA, CBI’s claim was restructured through a collateral exchange transaction (CBI 2014).

The Facility Deed had an initial term of one month but was later extended to June 30, 2012, and beyond (BOI 2012). It was purchased by NAMA from CBI when IBRC was liquidated in exchange for newly issued government-guaranteed NAMA bonds (MerrionStreet 2013a). Some of the PNs that were used as collateral with the CBI for the ELA eventually had a final maturity at 2031 (Baudino, Murphy, and Svoronos 2020).

The ELA facility was described as a loan, distinct and separate from the monetary operations of the ECB, provided to a credit institution against suitable collateral, where suitability is in line with criteria defined by the CBI (CBI 2011).

As noted, Anglo received ELA against three contractual arrangements: an MLRA, an SMRA, and a Facility Deed. Each had its own collateral or security requirements. Anglo’s annual reports provide some information that can be used to estimate the haircuts on collateral. At the end of 2009, Anglo’s borrowing under the MLRA came to EUR 11.5 billion (CBI 2011). Against that obligation, Anglo had assigned EUR 12 billion in customer loans as collateral, representing a weighted average haircut of about 4% (CBI 2010).

At the end of 2010, Anglo’s borrowing under the two repurchase agreement facilities totalled EUR 28.1 billion. Anglo held EUR 4.1 billion in customer loans as collateral under the MLRA, and EUR 25.3 billion in government PNs under the SMRA, for a total EUR 29.4 billion (Anglo 2011). That results in a similar weighted average haircut of about 4%.

At the end of 2011, IBRC’s borrowing under the combined programs totalled EUR 40.1 billion, of which EUR 10 billion was through the Facility Deed and not collateralized (BOI 2012; IBRC 2012). The remaining EUR 30.1 billion was through the two collateralized programs. At that time, IBRC held EUR 2.6 billion in customer loans as collateral under the MLRA; and EUR 28.5 billion in government PNs plus EUR 0.8 billion in NAMA bonds under the SMRA, for a total EUR 31.9 billion (IBRC 2012). That suggests a weighted average haircut of about 6%.

The CBI disclosed in its annual reports that haircuts to collateral were in the range of 5.5% to 80% in 2010, 1.5% to 58% in 2011, and 1.5% to 5.5% in 2012 (CBI 2011; CBI 2012; CBI 2013). The CBI also received a formal assurance (“formal comfort” or “letter of comfort”) from the minister for finance to be made whole on any shortfall in collateral values (CBI 2011, 104). The CBI used a similar approach to collateral as employed for Eurosystem monetary policy operations  (CBI 2011).

Research did  not uncover disclosure from the CBI on all the collateral that Anglo pledged through the length of its emergency liquidity borrowing. The CBI disclosed the following on the collateral accepted under the emergency liquidity facility, consistent with Anglo’s own reporting:

Regarding the ECB’s role in determining the CBI’s evaluation of collateral, Mario Draghi notes that “collateral is assessed by the competent supervisor, which at that time was the Central Bank of Ireland, and that is crucial because if the supervisor says the collateral is adequate, good and sufficient, then the Governing Council has no reason to object to the request by the national central bank” (Committee on Economic and Monetary Affairs 2015, 5).

This is in line with the notion that CBI’s emergency lending under the ELA facility is distinct and separate from regular funding operations carried out for monetary policy implementation purposes through the ECB (CBI 2011). Unlike normal monetary policy operations, where any losses are shared in proportion to the size of their economies and populations, any risks from the ELA facility are borne solely by CBI (IMF 2016). The relatively low apparent haircuts reflect the government guarantee that attached to the SMRA and Facility Deed loans.

The IMF reported that the troika program (EC, ECB, and IMF) of 2010 was controversial due to the decision to impose losses on EUR 19 billion worth of senior unsecured creditors. The IMF favored imposing a 50% haircut, which was fully supported by the Irish authorities. The ECB opposed such a haircut and their decision prevailed, on the grounds that such a move may disrupt wholesale funding markets across euro-area banks (Eichengreen 2015).

Balance Sheet Protection (B): The CBI lent to Anglo with an indemnity from the minister for finance on any losses arising from collateral shortfall.

The additional safeguard from the CBI’s perspective is the indemnity from the minister for finance to cover any shortfall that results from the liquidation of collateral from the provision of ELA to Anglo (Anglo 2011). This guarantee was possible from the power derived from The Credit Institutions (Financial Support) Act 2008. At the time of the CBI’s provision of emergency liquidity to Anglo, there were concerns on the Irish sovereign’s capacity to stand behind such an indemnity (Eichengreen 2015). The Irish state’s guarantee of the CBI’s emergency liquidity expired in 2018, and the possibility to extend in legislation was not exercised. The IMF recommended that the CBI and DoF should explore ways to mitigate potential losses, in the future scenario of a DoF backstop for the CBI’s emergency lending to a bank in resolution (IMF 2022).

Balance Sheet Protection (C): The Facility Deed was unsecured and backed by a government guarantee, but the minister had a counterindemnity agreement from the bank itself.

According to Anglo’s 2010 annual report, the Facility Deed was “an unsecured loan facility guaranteed by the Minister for Finance, who separately benefits from a counter indemnity from the Bank should the guarantee be called upon” (Anglo 2011, 95).  In other words, the minister guaranteed to the CBI that it would cover payments on Facility Deed loans, but the bank itself provided indemnity back to the minister (the value of this counterindemnity reflected the banking assets that remained on Anglo’s balance sheet). The counterindemnity agreement was signed between the minister for finance and Anglo on December 23, 2010, and was characterized as “co-terminus with payment of interest and prepayment of principal in full under the Facility Deed” (BOI 2012, 56).

As a member of the Eurosystem, the CBI is responsible for maintaining price stability in Ireland through the implementation of ECB decisions on monetary policy(CBI 2023). Article 14.4 of the Statute of the European System on Central Banks assigns the ECB’s Governing Council responsibility for restricting emergency liquidity operations if they interfere with the objectives and tasks of the Eurosystem(ECB 2017a, 4). Considering the large amounts of emergency lending granted to Anglo, the ECB stated in its communication to the Irish finance minister that the Governing Council would closely monitor the CBI’s emergency liquidity, as it may interfere with the objectives of the Eurosystem and may violate the prohibition of monetary financing (Trichet 2010a).

After IBRC’s liquidation in 2013, the CBI took ownership of the PNs, NAMA bonds, and Facility Deed. The Irish government exchanged the PNs for a portfolio of eight Irish sovereign floating rate notes (FRNs) (totaling EUR 27.8 billion) with maturities of 25 to 40 years. The Facility Deed was transferred to NAMA in return for NAMA bonds (totaling EUR 12.6 billion). The CBI undertook to sell the FRNs as soon as possible subject to financial stability concerns and no later than a schedule that was announced in February 2013 (CBI 2014). This was designed to strike a balance between monetary financing concerns associated with protracted holdings of bonds and the risks of a fire sale (Baudino, Murphy, and Svoronos 2020). All NAMA bonds had been fully redeemed by 2017, and all of the floating rate notes had been sold by 2023 (CBI 2024).

The ECB also provided other situations in which emergency liquidity may be curtailed, including the central bank’s financing of public sector obligations, or the provision of emergency liquidity to an institution that has been deemed insolvent as per national laws (ECB 2017a).

Since the conditions of the ELA are not disclosed, it is unclear if Anglo was subject to additional conditions that are specifically tied to receiving ELA. Anglo was required to report its daily liquidity position to the CBI and the IFSRA  from late 2008 (Tynan 2020).

As of March 2009, Anglo’s CET1 capital ratio of 1.4%  fell below the regulatory minimum of 4%. Given that the bank is covered under the state guarantee scheme, this triggered a need for a fundamental restructuring of Anglo. In addition, the Irish government noted that it would submit a restructuring plan for Anglo by November 2009 to the European Commission. The restructuring plan introduced some restrictions on Anglo’s commercial activities, including not providing new lending to existing customers for at least 12 months, an deleveraging the bank’s balance sheet. To avoid any distortions to competition, Anglo was restricted from marketing its support from the Irish state as a commercial advantage (EC 2009).