FT Alphaville


A lender of last resort is born

Emergency Liquidity Assistance. We know it well in eurozone central banks.

But for a euro-ised central bank…

This week’s IMF loan to Kosovo will effectively go straight to a reserve allowing the country’s central bank to extend ELA in euros to the country’s banks.

(Chart via the staff report)

Should the banks ever need it. They’re pretty well-capitalised and liquid at the moment. It’s teeny-tiny ELA (€46m) relative to what goes on in the eurozone.

We guess it’s something of a first, or at least unusual, as an IMF loan largely for funding ELA. Kosovo’s unilateral adoption of the euro for its economy (for a good decade now) meant it couldn’t previously provide ‘normal’ crisis liquidity to banks (previously it could have used its own cash reserves but it’s not quite the same).

Now it can.

So. There you are.