ECB draws up 'bad bank' scheme - bonds in exchange for portfolios of unpaid loans
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ECB draws up 'bad bank' scheme - bonds in exchange for portfolios of unpaid loans
ECB President Christine Lagarde has consulted banks and EU officials about a "bad bank" scheme in recent weeks as the COVID-19 outbreak squeezes borrowers and hinders new lending.
One blueprint would involve the European Stability Mechanism as a guarantor for the bad bank, which would issue bonds that commercial banks would buy - in exchange for portfolios of unpaid loans - and use as collateral for ECB funding.
The project would also require the blessing of Germany, which has long opposed shared responsibility for eurozone debts, though it did recently agree to pool EU borrowing for a coronavirus recovery fund.
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