European Central Bank President Mario Draghi turned a spotlight on banks’ riskiest assets when he said they need to reduce their holdings of hard-to-value investments.
A decade after the financial crisis, lenders in the region are still sitting on billions of dollars of illiquid holdings that could include the kind of mortgage-backed bonds and bespoke derivatives that sank lenders in the 2008 credit crisis. While they’re dwarfed by the pile of non-performing loans across the region, clearing out such assets would help pave the way to a more unified banking system in Europe and allow lenders based there to better compete with U.S. rivals.