Loss Sharing in the Eurosystem - Excluding Target2 Losses

Monetary Policy Operations Loss Sharing Among NCBs

Monetary policy operation losses are not automatically shared among Eurosystem NCBs.  They are shared only pursuant to an ECB Governing Council vote, which need not be pro-forma.

Article 32.4 of the ESCB Statute:*

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The Governing Council may decide that national central banks shall be indemnified against costs incurred in connection with the issue of banknotes or in exceptional circumstances for specific losses arising from monetary policy operations undertaken for the ESCB. Indemnification shall be in a form deemed appropriate in the judgment of the Governing Council; these amounts may be offset against the national central banks' monetary income.

Despite the plain language that a vote is required, Eurosystem official publications claim that this loss sharing is automatic:  

Updated as of Q3 2012** French/German bank exposure to Spain and Italy

With data through the third quarter of 2012 the trend remains the same - French and German banks continue reducing exposure to Spain and Italy.  As a reminder - Data is from the BIS consolidated banking statistics table 9D which shows exposure on an ultimate risk basis.  The value is reported in dollars but it includes claims in all currencies.