The euro jumped 0.4 percent within ten minutes after news from the European Investment Bank at 14:00 GMT, when it announced it could provide up to 74 billion euros of lending support to European banks over two years if its capital base was reinforced in part with cash from shareholders, according to a document prepared for EU finance ministers.
The EIB prepared a report outlining how it could counteract any lack of bank liquidity and will produce the outline to the EU finance ministers who are holding a meeting tomorrow.
“The risk of banks de-leveraging is not negligible and the EIB lending to the real economy through banks is thus important to maintain and even increase,” the EIB writes in the paper, dated November 3.
In the document, the EIB outlines a number of scenarios for bolstering its ability to lend, including one that would call on its shareholders to make a cash contribution.
“A temporary reinforced EIB support to the European banking sector… could amount over two years to … 48 billion euros with reinforced internal support … 64 billion euros with reinforced support through EU contribution… 74 billion euros with reinforced support through capital injection,” the document said.