ECB investigates Spanish loans

The European Central Bank (ECB) is checking whether it may have contravened its own strict rules by lending to Spanish banks on overly generous terms, an ECB spokeswoman said yesterday. German paper Die Welt am Sonntag said banks had borrowed funds from the ECB and taken a haircut of 0.5 per cent even though the creditworthiness of the Spanish T-bills they provided as collateral should have required the ECB to apply a haircut of 5.5 per cent. The rating of some paper should have made them completely ineligible as collateral for the ECB, the newspaper added.