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More Flight of Capital Out of the Eurozone


Switzerland and Denmark driving surge in euro deposits.

Here is a quick follow-up on the post discussing the ECB liabilities to non-eurozone entities. Large euro deposits originating outside of the eurozone can come from the Fed Liquidity Facility (the Fed took in euros as collateral for dollars it was lending out) or from other central banks trying to defend the euro peg.

The chart below is an attempt to subtract out the Fed Liquidity Facility from the non-eurozone deposit balances. It's not a straightforward exercise because the euro collateral does not exactly correspond to the amount of dollars lent, which is what is available on the Fed's website. The timing of the weekly reporting is also different. But the chart does give an indication of central banks other than the Fed placing euros with the ECB. There is no question (see Kostas Kalevras' most recent ECB update) that the increase is driven by either Switzerland or Denmark (or both) defending the currency peg, buying euros, and depositing them at the ECB. And the sellers of those euros are the eurozone's citizens trying to convert their money into other currencies.

Liabilities to non-euro area residents denominated in euro adjusted for the Fed's liquidity facility (€ bn) -- basically other European central banks depositing euros at the ECB.

The current balance is €172 billion less €24 billion from the Fed's facility gives €148 billion from other central banks. Here is the latest liability side of the ECB's balance sheet.

Twitter: @SoberLook
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