Friday

29th Mar 2024

ECB to change rules to buy Greek, Cypriot debt

  • The ECB is set to ease its rules to allow it to buy junk rated securities from Greek and Cypriot banks. (Photo: Valentina Pop)

The European Central Bank (ECB) is set to change its rules to allow it to buy asset-backed securities with junk ratings issued by Greek and Cypriot banks.

The ECB’s executive board, meeting Thursday (2 October), is to propose that its requirements on the quality of assets that can be bought by the bank are relaxed to buy the safer ABS issued by the two Mediterranean countries, the Financial Times reports.

Read and decide

Join EUobserver today

Get the EU news that really matters

Instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

It will also launch an asset purchase programme to buy debt products from banks at the meeting in Naples.

Under its current rules, the ECB only accepts ABS as collateral for its loans if they hold a credit rating of at least triple B. The ratings for Greece and Cyprus from the three main credit rating agencies range between single B and C.

Greece and Cyprus government debt securities have had a junk rating by major ratings agencies ever since they received their respective bailouts from the EU and the IMF, both of which involved bond-holders taking losses on their investments.

The move is unlikely to be popular in Germany where finance minister Wolfgang Schaeuble said last week that he was "not happy about the debate on the purchase of asset-backed securities".

Bundesbank chief Jens Weidmann has publicly opposed the plan on the grounds that it would involve a large transfer of risk from private banks to taxpayers.

The Frankfurt-based bank has launched a series of measures in recent weeks to ease credit conditions in the eurozone in its latest bid to stave off a spiral of economic stagnation, high unemployment and very low inflation across the currency bloc.

However, the bank has so far fallen short of printing money and buying up government debt - known as quantitative easing.

ECB announces €1 trillion bond-buying plan

The European Central Bank will start buying bank securities worth up to €1 trillion between now and the end of the year, president Mario Draghi has announced.

Opinion

EU Modernisation Fund: an open door for fossil gas in Romania

Among the largest sources of financing for energy transition of central and eastern European countries, the €60bn Modernisation Fund remains far from the public eye. And perhaps that's one reason it is often used for financing fossil gas projects.

Latest News

  1. Kenyan traders react angrily to proposed EU clothes ban
  2. Lawyer suing Frontex takes aim at 'antagonistic' judges
  3. Orban's Fidesz faces low-polling jitters ahead of EU election
  4. German bank freezes account of Jewish peace group
  5. EU Modernisation Fund: an open door for fossil gas in Romania
  6. 'Swiftly dial back' interest rates, ECB told
  7. Moscow's terror attack, security and Gaza
  8. Why UK-EU defence and security deal may be difficult

Stakeholders' Highlights

  1. Nordic Council of MinistersJoin the Nordic Food Systems Takeover at COP28
  2. Nordic Council of MinistersHow women and men are affected differently by climate policy
  3. Nordic Council of MinistersArtist Jessie Kleemann at Nordic pavilion during UN climate summit COP28
  4. Nordic Council of MinistersCOP28: Gathering Nordic and global experts to put food and health on the agenda
  5. Friedrich Naumann FoundationPoems of Liberty – Call for Submission “Human Rights in Inhume War”: 250€ honorary fee for selected poems
  6. World BankWorld Bank report: How to create a future where the rewards of technology benefit all levels of society?

Join EUobserver

EU news that matters

Join us