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Draghi Turns Spotlight on Riskiest Assets at European Banks

  • Hard-to-value holdings could affect EU banking union plans
  • French, German banks have biggest piles of Level 3 assets
Annual Meetings Of The International Monetary Fund And World Bank
Photographer: Andrew Harrer/Bloomberg
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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.