By Brian Blackstone
(Updates and expands with new information, broader sourcing.)
FRANKFURT--The European Central Bank is poised to relax its collateral
rules for central-bank loans in a bid to ease strains on commercial
banks in Spain and the rest of southern Europe, according to people
familiar with the matter.
ECB officials have broadly agreed to make more types of securities,
including certain mortgage-backed and asset-backed securities,
eligible as collateral at its lending facilities. Details of the plan
still need to be finalized, but a decision is expected Friday.
The move would likely spark renewed concerns about the safety of the
central bank's balance sheet, which totals more than 3 trillion euros,
a record high. Germany's central bank, the Bundesbank, has repeatedly
warned of the risks associated with the central bank's lending
facilities.
An ECB spokesman declined to comment.
(This story and related background material will be available on The
Wall Street Journal website, WSJ.com.)
A loosening of collateral rules would provide a lifeline to struggling
banks in Spain which are still dealing with the aftermath of that
country's burst property bubble. Spain's central bank estimated this
week that bad debts held by Spanish banks were more than EUR150
billion in April, an 18-year high.
Spanish banks need up to EUR62 billion in new capital to absorb losses
in the coming years, according to two independent analyses released
Thursday that will serve as the basis for a government request for
European Union aid to help finance a cleanup of the local sector. The
Spanish government is expected in coming days to make a formal request
to the EU for a bailout of its banks, which will add to Spain's
already soaring debt load.
A decision by the ECB to relax its collateral rules would shield banks
from the fallout a bailout would have on the ratings of the Spanish
government and private-sector bonds. Madrid has been hit by repeated
downgrades in recent months, as have covered bonds and other types of
securities.
Banks in Spain, Italy and the rest of southern Europe have found it
increasingly difficult to tap the interbank lending market for funds,
making them more dependent on the ECB. Outstanding Spanish bank
borrowing from the ECB totaled around EUR325 billion in May, and
Spanish banks were heavy users of the ECB's three-year lending
operations in December and February.
The ECB requires collateral for its loans and applies discounts, or
haircuts, based on the rating and maturity of the different types of
securities posted by banks. With banks in Spain and the rest of
southern Europe turning increasingly to the ECB, their pool of
available collateral is shrinking.
Write to Brian Blackstone at brian.blackstone@dowjones.com
(END) Dow Jones Newswires
June 21, 2012 15:06 ET (19:06 GMT)
No comments:
Post a Comment