FRANKFURT--The European Central Bank is considering whether to enact rules that would allow asset-backed securities issued by Greek and Cypriot banks that carry a junk rating to be purchased by the ECB under its new purchase plan, a person familiar with the matter said Tuesday.
The ECB is due to release full details of its ABS plan, which was first disclosed on Sept. 4 as part of a package of measures aimed at boosting growth and inflation in the eurozone, at its monthly meeting Thursday.
The proposal to allow these ABS purchases, which will be discussed at Thursday's meeting, highlights the challenge the ECB faces as it tries to shield its balance sheet from the risks associated with the assets it buys while at the same time ensuring that its monetary policies apply to all of the eurozone's 18 members.
Greece and Cyprus government debt securities have a junk rating by major ratings agencies. These countries were bailed out by European governments and the International Monetary Fund to avoid bankruptcy. Greece restructured its debts, with private bondholders accepting significant haircuts on their holdings, while large depositors at Cypriot banks had to take losses on their bank deposits as a condition for international aid.
Ratings agencies cap the ratings of bundled bank loans, a form of asset-backed securities, so that they can only be a certain number of notches above the rating of the sovereign itself. As a result, if the ECB's ratings rules on collateral were applied to ABS purchases, Greek and Cypriot ABS would have to be excluded.
The ECB proposal was reported earlier Tuesday by The Financial Times.
The ECB's potential concession doesn't mean the central bank will actually purchase these ABS securities, the person familiar with the matter said. Rather, it simply makes the instruments eligible for the program. This exception doesn't apply to other eurozone members, whose ABS instruments must carry an investment grade to be eligible for the program.
The bulk of ABS in the eurozone are issued in the Netherlands, France, Belgium, Italy and other large euro members. The share of Greek and Cypriot ABS are small in comparison.
German central bank President Jens Weidmann opposed the ECB's September plan to buy ABS and covered bonds, as well as its decision to reduce interest rates to record lows. Covered bonds are a type of security issued mainly by financial institutions in Europe, that offer investors a double layer of protection against default.
Germany's finance ministry has also signaled its opposition to the ECB's purchase plan, suggesting any exception for Greek and Cypriot ABS will meet a cool reception in Europe's largest economy.
"I am not happy about the debate on the purchase of asset-backed securities," German finance minister Wolfgang Schäuble said last week.
forse perché credo che i senior non verranno toccati, sarebbe un bel terremoto! certo tutto è possibile. 
