Banks that take on very high and/or unusually long-term debt to the central bank have obviously disregarded the Golden Banking Rule. They are considered to be unsound, which leads to a lower classification of their creditworthiness, their rating. As a result, they have to expect worse conditions on the nostro market, in effect higher refinancing costs. As in the USA, a central bank can subject such institutions to special supervision. – All other things being equal, government bonds are traded at a credit rating discount if the ratings for the countries concerned are poor. – See ECB Monthly Bulletin, September 2005, pp. 35 f. (with overviews).
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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
E-mail address: info@ekrah.com
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https://www.gerhardmerk.de/