The ECB maintains a list of "eligible assets," a sort of seal of approval for securities. Every major bank in the euro zone must have such securities, such as bonds or government bonds, or it would be excluded from the money market. There are currently 28,708 securities on the ECB list, with a total value €14 trillion at the end of 2010.

The national central banks determine which securities are placed on the list and under what conditions. "The ECB has no obligation to supervise the central banks, nor does it have the ability to monitor individual central banks," explains an ECB spokesman.

In other words, ECB President Jean-Claude Trichet doesn't even know exactly what kinds of risks he is taking on. In principle, the conditions for ECB investment-grade securities are outlined in a 37-page document, most recently updated in February. To keep the risks for the central banks within reason, some of the haircuts on securities are very high, comprising up to 69.5 percent of the value of a security.

However, the degree to which individual central banks strictly adhere to these rules varies. This leads to irregularities that should simply not occur in a bank, let alone a central bank.

For example, Depfa Bank, the Irish subsidiary of the scandal-ridden German bank HRE, had 78 securities placed on the ECB's list of investment-grade securities in February. According to documents SPIEGEL has obtained, 25 of those securities appear not to have been sufficiently discounted.

Eoin Treacy's view There was a great deal of speculation about who owned various bank and sovereign bonds at the commencement of the credit crisis in Europe. Since 2008 and following massive continent-wide supports for banks, a large number of toxic loans have been posted as collateral at the ECB. This article from Bloomberg contains a number of quotes reiterating the European policy of playing for time to allow the banking sector to raise its capital ratios to an acceptable level. Here is a section:

"Chances of a non-triggering event are increasing," Peter Schaffrik, head of European fixed-income strategy at RBC Capital Markets in London, said in an e-mailed note. "This could lead to some selling pressure on the underlying bond markets," he wrote, though it's likely that "sizes in the CDS market are simply too small to cause a large stir in the underlying sovereigns markets."

Voters across Europe might not like the idea of additional bailouts but the alternative could be far worse for their own counties given the exposure of the ECB and core Eurozone banks to peripheral debt.

The Euro Trade Weighted Index hit an important peak in 2008 and has been ranging with a volatile downward bias since. It posted a large weekly key reversal earlier this month and continues to follow through to the downside. However such has been the volatility of the market over the last year that a sustained move below 120 would be required to indicate a return to medium-term supply dominance.