The European Central Bank outlined new, looser collateral rules on Thursday that will allow banks in parts of the euro zone to swap a wider range of the traditional-style loans they give to firms and consumers for ECB funding. The ECB said seven of the 17 national euro zone central banks had put forward plans to broaden the list of collateral they accept from commercial banks in their countries.
Mario Draghi, the head of the ECB, said each national central bank would be responsible for any losses they incurred as a result of the changes. The ECB's 23-man Governing Council would have to approve each addition and that it would review the impact in six months time.
"Yes we are taking more risks, but does this mean that these risks won't be managed - no," Draghi said at the ECB's monthly post-meeting news conference. The penalty charges for using some of the newly eligible assets would be as high as two-thirds of their value, he said.
The still-to-be-finalised adjustments are part of sweeping round of changes the ECB first announced back in November to help stabilise the euro zone debt crisis. Ireland, Spain, France, Italy, Cyprus, Portugal and Austria plan to start accepting credit claims as a guarantee for central bank money.