Volume 23 (2017)

Volume 23 (2017) / Issue 2

Max Danzmann, 'Final Deposition of Losses Through the European Central Bank’s Balance Sheet' (2017) 23 European Public Law, Issue 2, pp. 365–394

Final Deposition; European Central Bank; Bad Bank; European Monetary Union; Financial Stability; Sovereignty; TARGET2; Fiscal Equalization; Outright Monetary Transactions; Extended Asset Purchase Program


The European Central Bank (ECB)’s unlimited potential to create money and its ability to indefinitely stave off insolvency, enable it to act as a ‘Bad Bank’. This can be implemented by using the ECB’s balance sheet to permanently deposit financial market participants’ losses which would otherwise jeopardize financial stability. While final deposition of losses is used as a policy instrument to establish financial stability, it also has a number of economic effects, such as redistributive effects, misdirected incentives and inflationary dangers. Against the backdrop of the ECB’s independence and the instable financial condition of the European Monetary Union, these consequences raise questions as to the Member States’ sovereignty.

Copyright © 2017 Kluwer Law International
All rights reserved

ISSN: 1354-3725
ID: EURO2017022