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Emergency Liquidity Assistance in the Eurosystem

Emergency Liquidity Assistance (ELA) is the form in which central bank credit can be provided to solvent credit institutions in exceptional circumstances, on a temporary basis and against adequate collateral. Since it constitutes a liquidity crisis management instrument, it is distinguished from monetary policy measures implemented by central banks.

The last online seminar by the Florence School of Banking and Finance, on 17 February 2020, discussed Emergency Liquidity Assistance in the Eurosystem with Christos Gortsos, Professor of Public Economic Law at the Law School of the National and Kapodistrian University of Athens, and Vítor Constâncio, former Vice-President of the European Central Bank.

In his presentation, Professor Gortsos presented the legal underpinnings of ELA in the Eurozone, on the basis of his upcoming book European Central Banking Law – The Role of the European Central Bank and National Central Banks under European Law (Palgrave Macmillan). As part of a traditional approach often referred to as ‘constructive ambiguity’, the conditions under which central banks may exercise their power to act as lenders of last resort are not set out explicitly in legislative or regulatory provisions. This applies also in the context of the Eurozone, where ELA is not provided for in the EU Treaties: the relevant procedural arrangements are laid down in the 2017 ECB “Agreement on emergency liquidity assistance”, which outlines the certain technical specifications for the procedures of ELA provision. In his presentation, Professor Gortsos explained who provides ELA and under which conditions, as well as when and how ELA provision can interfere with the objectives and tasks for the Eurosystem.

Vítor Constâncio then commented on the presentation highlighting the application and interpenetration of the agreement, on the basis of past experiences during the Euro crisis. During the debate that followed, both speakers highlighted the lessons learned from the past episodes, and what are the possible avenues for the future, particularly for possible upcoming revisions of the existing ELA mechanism.

Download the presentation by Christos Gortsos