ECB will back banks if unrest erupts after French presidential vote

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A municipal employee prepares ballot boxes on the eve of the first round of the French presidential election at a polling station in Tulle, France. The European Central Bank said it is ready to support banks after the French vote. Photo: Reuters

Published: 4:04am, 23 Apr 2017Updated: 4:04am, 23 Apr 2017

European Central Bank officials signalled that their liquidity facilities remain available to counter any market tension that may arise in the aftermath of France’s presidential election, the first round of which takes place Sunday.

“The central bank should be ready for any shocks that should materialise,” Governing Council member Ignazio Visco said at a press conference during the International Monetary Fund spring meetings in Washington on Saturday. “And if there were to be such a shock, the instruments are the instruments that a central bank should use, which are liquidity provision, refinancing when needed. And intervening very quickly is really very easy now given the instruments we have.”

Like the UK’s vote on whether to continue its membership of the European Union in June, central bank readiness to support the banking system has been sought given the potential for such political events to create market turmoil.

France was on edge on April 22 on the eve of its most unpredictable presidential election in decades, which will take place under heightened security after the jihadist killing of a policeman. Photo: AFP

In this case, a strong showing in the first round by anti-euro candidate Marine Le Pen could cast doubt over the future of the single currency. Visco argued that the presence of central bank facilities makes it less likely they’ll actually be needed.

The ECB, the Bank of England and the Bank of Japan in 2016 issued statements to underline the availability of cash lines; in the end, little tension emerged in the banking sector as a direct result of the UK’s Brexit vote.