ESM bank license

Article 32, paragraph 9, of the Treaty on the European Stabilization Mechanism states that “the ESM shall be exempt from any authorization or licensing requirement … for credit institutions.” Thus, the ESM may act as a bank if it so wishes. Admittedly, the ESM must be licensed with the ECB in order to be able to exploit the advantages of a bank. However, there is no legal obstacle to this. This is because the ESM – unlike the EFSF bailout fund – is an international financial institution and as such a legal counterparty for the ECB. So if the ESM, as a bank, extended a loan of 10 billion euros to the Italian government, it would not have to collect the money first and then transfer it to Rome. Rather, the Italian government would simply be credited with 10 billion euros in an ESM account. This would create new money. The ESM would only have to fulfill the ECB’s minimum reserve requirement; in the example case, this would currently be 100 million euros.

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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
https://de.wikipedia.org/wiki/Gerhard_Ernst_Merk
https://www.jung-stilling-gesellschaft.de/merk/
https://www.gerhardmerk.de/