ECB in talks with Italy over buying bundles of bad loans

The European Central Bank is in talks with the Italian government about buying bundles of bad loans as part of its asset-purchase program and accepting them as collateral from banks in return for cash, the Italian Treasury said.

The move could give a big boost to a recently approved Italian scheme aimed at helping banks offload some of their 200 billion euros ($225 billion) of soured credit and free up resources for new loans.

Nonetheless, it would likely fuel a debate in other countries about whether the ECB is taking on too much risk by buying asset-backed securities (ABS) based on loans that have not been repaid for roughly three months.

Italian Treasury officials told reporters the ECB may buy these securities as part of its 1.5 trillion euros asset-purchase program or accept them as collateral from banks in return for cash, in so called repurchase agreements.

http://www.reuters.com/article/us-eurozone-ecb-abs-idUSKCN0VO0GY

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