ECB Says Bad-Loan Market Could Be Aided by an Actual Market for Bad Loans
- Non-performing loan market suffers from information assymetry
- Low investor base is damping prices for NPL sales, ECB says
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The European Central Bank called for the implementation of transaction platforms as a way to help banks and investors overcome hurdles in selling bad loans.
An electronic system that provides data and transaction services for non-performing loans could spur new investors to enter the market, the ECB said on Monday in a special feature from its Financial Stability Review. Improving market liquidity would allow banks to achieve better prices for NPL sales, preserve their capital and mitigate financial-stability risks, the ECB said.