ECB loosens its collateral requirements for lending

THE EUROPEAN Central Bank (ECB) has announced that it is prepared to accept a wider range of collateral in return for dishing out emergency funds to the Eurozone’s floundering banks.

It said that it will now accept assets that are not listed on regulated public markets as collateral, potentially opening the way for billions in asset-backed securities that are sitting on bank balance sheets to be used as security for funding.

At the same time, the Bank said that it is cutting down on its limit for accepting unsecured collateral from 10 per cent of the total collateral value to five per cent.

Meanwhile, European Commission president José Manuel Barroso has again raised the spectre of euro-bonds as a solution to the debt crisis, telling Bloomberg yesterday: “We should not exclude that option.”