Friday, May 17, 2013

European Central Bank eyes supervisor role to squeeze weak banks

The European Central Bank could use its new supervisory role from next year to single out weak banks and make it harder for them to get its financial support, people familiar with the matter say.

Such a hardening of approach would keep ECB funding flowing to Europe's most important lenders but compel laggards to beef up their capital buffers, prod national central banks to take on the problem or even force some banks to go to the wall.

The thinking denotes a growing concern at the ECB, which bankrolls much of the financial system, about the risks of backing banks with often only weak collateral as security.