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Their liquidity is supported by more generous collateral rules at central banks.
Relaxation of collateral rules for banks will be discussed next month.
2.06pm: Another journalist asks whether the decision to tear up the collateral rules for Greek debt last weekend was unanimous.
The E.C.B. said that 800 banks put in for loans, compared to 523 in December, as many smaller lenders took advantage of the central bank's broader collateral rules.
Even the healthiest banks—including those that insist they never needed help continue to rely on government assistance in the form of liquidity facilities, generous collateral rules and the like.
That collateral was debt issued or guaranteed by the Greek government, which was junk-rated and therefore barred by the ECB's collateral rules, which insist on an investment-grade credit rating.
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Ratings are, for instance, used in evaluating capital standards and in central banks' collateral-eligibility rules.
That is why I, along with Senator Robert G. Torricelli, have introduced a bill to repeal the collateral source rule.
The collateral source rule holds that a wrongdoer cannot benefit from payments a victim receives from other sources, such as insurance companies, government agencies, and private donors.
Reconsideration of the collateral source rule would also be required before adoption of a public policy going beyond intelligent notions of fairness.
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