Possible ECB changes on collateral may hit Spain harder

08/29/2008 | Bloomberg

Spain's economy, already hurting from the global credit crisis, may be pained further as the European Central Bank considers new lending practices aimed at preventing banks from "gaming the system." Observers said possible changes include reducing funds that banks can borrow for every euro of asset-backed collateral and making it more difficult for banks to use as collateral bonds backed by loans that they issued. Such changes would negatively affect Spanish banks in particular because they have amassed more of their own asset-backed securities than any other eurozone bank.

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