Sunday, February 19, 2012

ECB and central banks become more varied lenders of last resort

The ECB is willing to take a greater variety of collateral for lending to different banks. The central banks in the Euro-zone will now allow for a different assets to be pledged which actually adds to confusing about ECB policy. Because the pool of good collateral by some banks has been exhausted there is a need to widen the set available. What is different with this program is that each central bank can tailor the collateral that can be used as pledges within their country. Italy will allow leasing and factoring other central banks will not. Ireland, Portugal, and France will allow residential mortgages. 

All banks are not created equal. Each will get to be managed differently. This does not sound like unification. 

ta the same time, the ECB has stopped buying sovereign bonds. Thy will take bank collateral but will not buy sovereign debt directly. This is odd. 

No comments: