debt, crisis, interestIf the EFSF (European Financial Stability Facility) borrows money at a low interest and then lends it at a slightly higher interest, then what happens with the profit once the borrowed money is payed back?
Just to clarify, the EFSF is a lending facility that was created by the European Central Bank (ECB). The facility itself does not do any borrowing or lending, that is done by the banks.
The profit from lending is kept by the ECB in its general reserve fund or distributed to its member banks:
The net profit of the ECB shall be transferred in the following order:
(a) an amount to be determined by the Governing Council, which may not exceed 20% of the net profit, shall be transferred to the general reserve fund subject to a limit equal to 100% of the capital;
(b) the remaining net profit shall be distributed to the shareholders of the ECB in proportion to their paid-up shares.
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