The European Central Bank told governments that they should consider combining a so-called bad bank with guarantees of securities if they want to pursue the most cost-effective way of ridding lenders of toxic assets. In draft guidelines to be discussed at a meeting of European finance ministers in Brussels today and tomorrow, the ECB said the number of illiquid assets on banksâ books is likely to mount as the credit crisis shows no sign of ending. Lawmakers from Washington to Berlin are studying how to clear the toxic assets clogging bank balance sheets and preventing them from lending. Banks worldwide have written off almost $1.1 trillion since August 1997, a total that could reach $3.6 trillion, says economist Nouriel Roubini, and the ECB is seeking to provide a framework to deal with further woes. âThe credit crisis has not yet reached the bottom of the cycle,â the ECB said in a report dated today and obtained by Bloomberg News. âThe amount of impaired assets is likely to continue growing in the future.â While acknowledging that the best strategy varied depending on the bank and country, the ECB noted that Switzerland recently extended aid to UBS AG through a âhybrid schemeâ involving elements of a bad bank and insurance. The Swiss National Bank and UBS set up a special fund to buy as much as $60 billion in toxic investments from UBS. http://www.bloomberg.com/apps/news?pid=20601087&sid=apaBT0gUs47M&refer=home
Acknowledging the worst is yet to come in one breath and they saying the government should issue guarantees in the next breath is lunacy. They automatically set themselves up for a disaster. I can not believe the stupidity or perhaps the corruption. Either way... good god
Wow, shocker. Didn't Jürgen Stark (Bundesbank) say that there is "no real credit crunch in the EUR zone" just 2 weeks ago????
Dec, 11th 2006 : ECB Warns of `Herd-Like' Mentality in Derivatives http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aKd2bSuB5rRc It pays off to read ECB "warnings" !