The Italian Treasury has revealed that the European Central Bank (ECB) is in talks with the Italian government over the possibility of buying bundles of bad loans as part of its asset-purchase programme and accepting them as collateral from banks in return for cash. In a letter to Italy's finance minister, Pier Carlo Padoan, the ECB's executive board said it was "considering options on how best to support Italy through this difficult period". However, it is also likely to fuel a debate from other countries about whether the ECB is taking on too much risk buy buying asset-backed securities based on loans that have not been repaid for roughly three months.
The Italian Treasury has revealed that the European Central Bank (ECB) is in talks with the Italian government over the possibility of buying bundles of bad loans as part of its asset-purchase programme and accepting them as collateral from banks in return for cash. This move would be a big boost to the recently approved Italian plan aimed at helping its banks to offload some of their €200bn ($225bn) of soured credit and free up resources for new loans. However, it is also likely to fuel a debate from other countries about whether the ECB is taking on too much risk buy buying asset-backed securities based on loans that have not been repaid for roughly three months.