How the ECB’s Ambitious Plan to Curb Risky Lending Veered Off Course
The supervisor is pushing banks to face the risks in their leveraged loan books, but a poorly handled probe has raised questions about its approach.
The ECB headquarters in Frankfurt. The watchdog is on a collision course with some of the region’s largest lenders.
Photographer: Alex Kraus/BloombergThis article is for subscribers only.
Supervisors at the European Central Bank were in a bind.
They were sure interest rates would eventually rise, ending a decade of ultra-loose monetary policy after the global financial crisis that had encouraged risk-taking. Yet banks were largely ignoring their guidance to curb lending to highly indebted companies, challenging the institution’s authority.