Germany's top central banker has warned the European Central Bank against buying securitised debt, saying that such a move could turn it into the bad bank of Europe.
"The revival of the securitisation market is not a primary task of monetary policy," European Central Bank policymaker and Deutsche Bundesbank president Jens Weidmann told an audience in Halle in eastern Germany.
“The euro system must not become the bad bank of Europe by taking risks off banks and passing them onto the taxpayer.”
Mr Weidmann’s blunt remarks follow preparations by the ECB for possible future purchases of asset-backed securities. It is a key plank in plans to revive lending to small companies.
Now the opposition from Germany poses an obstacle to its launch.
The market is potentially large. Banks have lent almost €4 trillion in loans of under €1 million.
But securitisation evokes memories of the mortgages and car loans packaged by US banks that triggered a credit crunch in 2007, leading to the collapse of Lehman Brothers bank and global financial crisis.
ECB president Mario Draghi has emphasised that only "simple and transparent" packages of debt would be considered but Mr Weidmann's comments underscore the deep mistrust of this market.