Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Capital Flight Out Of Eurozone Seen In Foreign Deposits At The ECB

By Sober LookMarket OverviewJun 17, 2012 02:04AM ET
www.investing.com/analysis/capital-flight-out-of-eurozone-seen-in-foreign-deposits-at-the-ecb-126734
Capital Flight Out Of Eurozone Seen In Foreign Deposits At The ECB
By Sober Look   |  Jun 17, 2012 02:04AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

When a non-Eurozone central bank holds euros, it tends to deposit those euros with the ECB. So when the Fed executed its liquidity swap, it received euros as collateral and deposited  them in its account at the ECB. That deposit by the Fed created a "non-Eurozone resident" liability at the ECB.

But the Fed's liquidity swap is now a fraction of what it was at its peak. The ECB returned the dollars and the Fed returned the euros.

Fed Liquidity Swap
Fed Liquidity Swap

That means the ECB's liability to non-Eurozone residents should have declined. And it has, until recently. But now we have a new spike in non-resident liability at the ECB. So who outside the Eurozone is depositing a massive amount of euros? The Swiss National Bank (SNB) of course. As as the SNB defends the Swiss Franc from strengthening (trying to keep the peg at 1.2), it buys a great deal of euros and of course promptly deposits them at the ECB, increasing the non-resident liability .

Therefore this second spike is created by flight of capital our of the Eurozone (the ECB provides this data on a weekly  basis - ht Kostas Kalevras - allowing one to monitor the trend closely). Note, these euros are still held within the Eurozone (the amount of euros is always fixed unless the ECB chooses to change it), but they no longer belong to Eurozone residents. These Eurozone residents have swapped these euros for Swiss Francs. .

EUR deposits by nonresidents at the ECB
EUR deposits by nonresidents at the ECB

Capital Flight Out Of Eurozone Seen In Foreign Deposits At The ECB
 

Related Articles

Boris Schlossberg
The Hundred Year Portfolio? By Boris Schlossberg - May 07, 2021

Diversifying by market regime rather than asset class The “Moneyball of Money” approach Challenges for the DIY investor In part one of our analysis of Chris Cole’s appearance on...

Jeffrey Halley
Non-Farms Is A Crowded Trade By Jeffrey Halley - May 07, 2021 1

Friday is finally here, and with it the week’s data highlight, the US Nonfarm Payrolls. It has been a choppy week of trading across most asset classes. As the dust settles,...

Capital Flight Out Of Eurozone Seen In Foreign Deposits At The ECB

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email