Mario Draghi’s plan to spur growth by getting the European Central Bank to buy asset-backed securities and persuade lenders to sell more of the bonds is being met with skepticism by the region’s biggest money managers.
The ECB’s president is considering broad-based asset purchases, known as quantitative easing, to ward off deflation. He’s also promoting the market for bonds backed by loans to small- and medium-sized enterprises in a bid to increase funding to the businesses that employ about 70 percent of the European Union’s private-sector workers.
Draghi is seeking to free up bank balance sheets by reviving Europe’s $2.1 trillion ABS market, which contracted 32 percent since 2009 as regulators cracked down on the debt blamed for deepening the financial crisis. With lenders’ profits being squeezed by tougher capital rules, money managers are concerned they’ll use the opportunity to boost earnings.
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