The amount of credit debt that is unlikely ever to be repaid is growing inexorably, and the European Central Bank is developing a scheme to deal with it.
This was reported by the agency “Reuters” on Wednesday, June 10, citing its own sources, familiar with the situation.
The total debt in the EU territory has already exceeded €1.5 trillion. It includes car loans, consumer loans and mortgages. Sources say the figure is growing as the impact of the pandemic puts pressure on borrowers. The amount is predicted to double, which is bound to hit weaker banks and make new lending difficult.
In this regard, ECB officials are considering a “bad bank”. The idea came up 2 years ago, but it was not implemented. Now the head of the European regulator Christina Lagarde has taken up its discussion with banks and EU officials, one of the agency sources said.
The so-called “bad bank” will be used to store unpaid debts there. However, the implementation of the concept will require the approval of Germany, which is known to oppose the distribution of responsibility for debts among the countries of the Commonwealth.
Reuters also notes that the ECB did not answer the question whether they are working on a scheme with a “bad bank”.