ECB purchase of asset-backed notes problematic for Italy banks-UniCredit

CERNOBBIO, Italy, April 5 Sat Apr 5, 2014 9:56am EDT

Related Topics

CERNOBBIO, Italy, April 5 (Reuters) - Italian banks would be at a disadvantage if the European Central Bank (ECB) decides to buy asset-backed securities as part of unconventional measures aimed at staving off deflation risks, the chief executive of UniCredit said on Saturday.

ECB President Mario Draghi said on Thursday the central bank had unanimously agreed that asset purchases, also known as quantitative easing, might be needed if inflation proves persistently low.

The ECB has yet to discuss details of how it could carry out any quantitative easing, ECB Vice President Vitor Constancio said on Friday.

Purchases of asset-backed securities are regarded as one of the possibilities. But UniCredit CEO Federico Ghizzoni said that if this was the case, Italian banks would not have assets that are "easily purchasable" by the ECB.

"One of the problems is that there are several credit lines for which there is no standard documentation, or sometimes none at all, especially when it comes to short-term credit," the head of Italy's biggest bank by assets said.

The bulk of Italian bank lending has a short-term maturity, he told journalists on the sidelines of a business conference.

In Italy, a widespread form of bank lending to small businesses is through an overdraft on their bank accounts.

The lack of standard documents for a loan of this type would make it hard for banks to securitise it, or use it as collateral to issue a debt security. (Reporting by Valentina Za; Editing by David Holmes)

FILED UNDER: