ECB pushes banks to ditch problem loans
Making it easier for eurozone banks to sell off problems loans would help unblock the banking system, according to the deputy governor of the Irish Central Bank Sharon Donnery.
Such loan sales have been controversial in Ireland since the crash, with US so-called vulture funds the dominant buyers.
However, Sharon Donnery, who heads up a eurozone-wide effort to tackle non- performing loans, said impediments to sales slow down the recovery of bank balance sheets in a number of countries.
"The underdevelopment of secondary debt markets also impedes non-performing loan resolution in most of the countries surveyed. Specific obstacles in the legal and regulatory framework appear to be the cause of such a market stagnation," she said at an event at the Bruegel institute in Brussels yesterday.
Meanwhile, European Central Bank vice-president Vitor Constancio called for the creation of government-backed bad banks - similar to Nama - to help buy some of the €1 trillion in problem loans weighing down eurozone banks.
With lenders in Italy and other weaker economies struggling to find buyers for their bad credit, Vitor Constancio said there should be an EU "blueprint" for creating asset-management agencies. Germany has shot down a European Banking Authority proposal for an EU-wide bad bank even as the ECB ratchets up pressure on lenders to sell problem customer loans to free up new lending capacity.