27th Oct 2016

ECB probes potential blunder on Spanish loans

  • Bankia is one of the main troubled banks in Spain, with losses of €7bn (Photo: Carlos Blanco)

The European Central Bank (ECB) has launched an inquiry into claims that it gave out cheap loans to Spanish banks based on over-rated treasury bills, an ECB spokeswoman told news outlets on Sunday (4 November).

The German weekly Welt am Sonntag the same day ran a story citing its own research, which says that banks in Spain saved up to €16.6 billion on loans secured on over-rated collateral.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

Based on the quality of the collateral, the ECB requires banks to pay more or less on the loans they are receiving.

In the case of the Spanish treasury bills, the ECB rated the loan guarantees as "low A," even though they should have been labelled B, in line with ratings given by major agencies such as Moody's or Standard &P oor's.

The ECB puts its trust a lesser-known rating agency, DBRS, which still rates the Spanish bills as A class, Welt am Sonntag says.

The paper also noted that Irish treasury bills were correctly classified as B-rated, meaning that Irish banks had to pay more for their ECB loans than Spanish banks did.

"In Ireland forbidden, in Spain allowed," Welt am Sonntag's headline notes.

"The ECB is investigating the matter," the ECB spokeswoman said.

If proven correct, the blunder could harm ECB credibility at a time when EU ministers and the European Parliament are negotiating details of granting the bank an over-arching supervision role over the eurozone's 6,000 banks.

The German central bank - which opposed the loosening of ECB loan conditions, as well as the upcoming bond-buying scheme designed to help the Spanish government lower its borrowing costs - has repeatedly warned that the ECB is pooling too much risk on its balance sheets.

Stakeholders' Highlights

  1. ANCI LazioAnci Lazio Definetely has a lot to Celebrate This Year
  2. EU-China ForumDebating the Future of the EU-China Relations on 28 November in Prague
  3. COMECEMigrants: From Fear to Compassion
  4. Birdlife EuropeBusiness as Usual - Juncker Snubs Environment and Protects Broken CAP
  5. EFADraft Bill for a 2nd Scottish Independence Referendum
  6. UNICEFCalls on European Council to Address Plight of Refugee and Migrant Children
  7. ECTAJoin us on 9-10 November in Brussels and Discover the new EU Digital Landscape
  8. Access NowCan you Hear me now? Verizon’s Opportunity to Stand for Global Users
  9. Belgrade Security ForumMeaningful Dialogue Missing Not Only in the Balkans, but Throughout Europe
  10. EuropecheEU Fishing Sector Celebrates Sustainably Sourced Seafood in EU Parliament
  11. World VisionWomen and Girls Urge EU Leadership to Help end Gender-based Violence
  12. Belgrade Security ForumGet the Latest News and Updates on the Belgrade Security Forum @BelSecForum

Latest News

  1. Belgium breaks Ceta deadlock
  2. Left MEPs thwarting Dieselgate probe, say right MEPs
  3. Cars should be allowed to exceed emissions limits, say experts
  4. EU case against Google is bad for developers
  5. Privacy activists mount court challenge to EU-US data pact
  6. Thousands of Nato soldiers go to Baltic states, Romania
  7. Canada's PM cancels EU summit amid Ceta woes
  8. Commission revives corporate taxation plan