In an attempt to break the overwhelming dominance of some large international funds in the nonperforming credit market, the European Central Bank (ECB) is considering launching an online marketplace for the entire euro area in which any investor can search and acquire problematic debts held by banks.
The idea, according to Reuters, is one of the components of the response strategy that the ECB will propose to the euro area to deal with the excess of bad loans accumulated by the banking sectors of several countries. The central bank headed by Christine Lagarde wants to prevent large investment funds specializing in this type of activity, such as Lone Star, Blackstone or Cerberus, from continuing to buy the outstanding credit with which the banks want to extract themselves at prices balance and in bundles. the urgency of improving their capital ratios.
To achieve this, an ECB official, Edward O’Brien, told Reuters, “The idea is to open up the market. [do crédito malparado] to buyers of small wallets, by launching an Amazon or eBay style marketplace. In this online market, each investor can search for the credits that interest him the most and make a purchase proposal.
It is normal that a bank, when trying to sell the rights to loans that are difficult to recover, should agree to do so at a discount. In other words, he receives less for the loans than he had borrowed. The problem at present is that funds specializing in this type of operation – sometimes called “vulture funds” -, taking advantage of their dominant position on the market and the urgency of banks, carry out large purchases of loans ( in hundreds of millions of euros in packages) and at a very high discount, which, according to the ECB, is detrimental to banks and their stability.
According to Reuters, in the proposal that will be presented by the ECB to European governments on Friday, it is predicted that, on the online platform for selling non-performing loans, the available packages will not exceed 10 million euros, thus attempting to do it. attract smaller investors and create more competition, which can lead to lower discounts.