First, some commentators have stated that, since the ECB’s balance sheet is expanding and is allegedly taking on large risks, the ECB may be turning into a “bad bank”.3 This argument is based on a clear misunderstanding of the type of operations conducted by the Eurosystem and of the risk control measures applied to those operations.
The description of the risk control measures and of the specificities of the capital position of the ECB that I just provided should help dispel such misunderstanding.