European banks swap bonds with funds to secure ECB cash

11/22/2011 | Wall Street Journal, The

European banks are paying pension funds and insurers to swap the banks' illiquid bonds for higher-quality securities to secure short-term funding from the European Central Bank. The swaps are happening because interbank lending has nearly ground to a halt because of the sovereign-debt crisis. The U.K. Financial Services Authority noted risks associated with the practice, but an industry group said points mentioned by the regulator are not insurmountable.

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