Saturday, September 8, 2012

'Soup Kitchen' for Struggling European Banks?

The European Central Bank’s decision to relax bank funding rules to mirror conditions last seen after Lehman Brothers Holdings Inc.’s collapse signals hard times for lenders.

“The soup kitchen for impoverished euro-zone banks is re- opening,” said Simon Maughan, a strategist at Olivetree Securities Ltd. in London. The easing shows “some peripheral banks have run out of collateral and so we need to widen the bounds of acceptability to accommodate them.”

ECB President Mario Draghi said yesterday the central bank will lend against assets in dollars, pounds and Japanese yen, as well as in euros, reopening a program that ran for two years following the September 2008 bankruptcy of the U.S. investment bank. The ECB also eased borrowing against government-issued or guaranteed assets by dropping rating requirements. Read More