Eurozone banks borrowing from ECB formally ends borrowing from central bank stigma

By flocking to the ECB's long term funding program, Eurozone banks have forever ended the idea that there is any stigma involved in borrowing from the central bank.

As reported in a Bloomberg article,

“The perceived stigma attached to central bank borrowing has not prevented euro-zone banks from making extensive use of the ECB’s offer,” said Martin van Vliet, an economist at ING Group in Amsterdam. “The take-up of loans is massive.”

This is very important because it is the stigma argument that central banks trot out as to why they cannot disclose the names of the banks that borrow from them.

The stigma argument goes: if we disclose the names of the borrowers, then they will be reluctant to borrow from us again when they need to.

Apparently the stigma argument was a fantasy of central bankers and had no basis in reality.

The size of the loan take-up will be virtually impossible for the borrowing banks to hide on an individual basis from the market.  It is pretty clear when a bank does not rollover its private market borrowings.

Please note, under the FDR Framework, banks would be required to provide ultra transparency on an on-going basis by disclosing their current asset, liability and off-balance sheet exposure details.  This disclosure would have shown all central bank borrowings.

Fortunately, market participants are sophisticated enough to be able to use this data to understand the distinction between temporary borrowing from misestimating reserves from semi-permanent borrowing because the bank is a zombie.