FEARS over the security of Ireland’s bank bailout package have been raised by the European Central Bank, amid concerns it could impact on its ability to offer funds to support the Eurozone financial system.
The Frankfurt institution has “serious concerns” over the legal certainty of legislation rushed through in order to provide Ireland with an emergency bailout.
The deal could impact on the ECB’s rights, as well as those of the Irish central bank and possibly other central banks within the Eurozone, a position paper on the ECB’s website said.
Underlying concerns is the size of the Irish bailout and the security of the assets put forward as collateral to the arrangement.
Recent data shows Irish banks hold €136bn (£115bn) in outstanding loans from the ECB, which equates to almost a quarter of the total in the Eurozone, as well as €45bn in funds from the Irish central bank.
The central bank is concerned the strength of collateral assets provided by Ireland could be insufficient, should the bailout not be paid back.
Since May the central bank has taken on an increasing number of risks as European economies continue to struggle, having bought €72bn in Eurozone governments’ bonds in order to prevent borrowing costs becoming unmanageable.
Last week, it also reached out to Eurozone countries to provide an extra €5bn in subscribed capital in order to shore up its financial stability.
Ireland is currently passing legislation to implement its rescue package, though the ECB calls for further clarity in the law to ensure its rights.