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ECB Said to Dilute Distressed-Bank Plan as Debt Crisis Worsens

The European Central Bank plans to dilute a proposal to wean distressed banks off its emergency funding on concern it would exacerbate the region’s debt crisis, said two euro-area officials familiar with the deliberations.

Instead of imposing higher interest rates on emergency loans to penalize Greek, Irish and Portuguese banks, the ECB and national central banks would ask financial institutions to detail how they will repay the money, said one of the officials. He spoke on condition of anonymity because talks are ongoing. Banks would also need to outline expected future ECB funding needs and how they plan to raise money in markets, he said.