European Central Bank officials have held high-level talks with counterparts in Brussels about creating a eurozone bad bank to remove billions of euros in toxic debts from lenders’ balance sheets.
The plan to deal with debts left over from the 2008 financial crisis is being pushed by senior ECB officials, who worry the coronavirus pandemic will trigger another surge in non-performing loans (NPLs) that risks clogging up banks’ lending capacity at a critical time.
But the idea faces stiff opposition within the European Commission, where officials are reluctant to waive EU rules requiring state aid for banks to be provided only after a resolution process imposes losses on their shareholders and bondholders.
“The lesson from the crisis is that only with a bad bank can you quickly get rid of the NPLs,” Yannis Stournaras, governor of the Bank of Greece and member of the ECB governing council, told the Financial Times. “It could be a European one or a national…
