ECB Rates Allow Zombie Loans to Crowd Out New Credit, BIS Says
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Loose monetary policy makes it easy for euro-area banks to keep bad debt on their books, potentially delaying the flushing out of sour loans, the Bank for International Settlements said in its annual report.
The European Central Bank’s record low interest rates and ample liquidity have boosted banks’ lending margins, allowing them to gloss over losses in their business, the Basel, Switzerland-based BIS said in the report, released today. That’s what makes it so crucial to find other means to fix banks’ balance sheets, such as the ECB’s asset-quality review, it said.