ECB Said to Relax Requirements for Mortgage-Backed Collateral

The European Central Bank will relax some rules on the collateral that banks can offer in exchange for ECB funds, said a central bank official.

The Frankfurt-based central bank’s Governing Council decided yesterday to lower the minimum rating threshold for mortgage-backed securities to BBB- from A-, said the official, who declined to be identified because the discussions were private. Spanish banks have been unable to use some securities as collateral because the rating is too low, the person said.

Spanish institutions would need as much as 62 billion euros ($78 billion) in capital to withstand a worst-case economic scenario, two consulting firms hired by the government to conduct stress tests on the lenders said today. Economy Minister Luis de Guindos has said Spain will use the results of the studies to determine how much money it might need to draw from the 100 billion euros made available by Europe after it requested funding to clean up banks.

An ECB spokesman declined to comment. Financial Times Deutschland reported the ECB decision earlier today.