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Buba Chief Weidmann Criticizes ECB Stimulus Plan: Report

Bundesbank President Jens Weidmann has criticized the European Central Bank's latest measures to boost the euro area economy, such as the planned purchases of covered bonds and asset-backed securities and covered bonds, as well as the interest rate reduction this month.

The latest decisions suggest a fundamental shift in strategy and a drastic change for the ECB's monetary policy, Weidmann reportedly said in an interview to the German magazine Der Spiegel, published on Sunday.

The majority of the Governing Council has signaled that monetary policy is ready to go very far and to enter new territory, he added.

Last week, banks took up less-than-expected amount of funds at the ECB's first targeted longer term refinancing operation, or TLTRO, damping the hopes of the success of the measure that was aimed to boost liquidity to help revive lending to small businesses and households.

Results of its first TLTRO showed that 255 banks were allotted EUR 82.60 billion, which was below the EUR 100 - EUR 150 billion predicted by analysts.

With the poor take-up of TLTRO funds, the question remains whether the ECB's proposed measure of purchasing covered bonds and ABS will help it to achieve its goal of expanding the central bank's balance sheet to EUR 1 trillion.

Buba's chief warned that depending on the exact design of the ABS purchase-plan, banks could be exempt from risks at cost of taxpayers. Hence, it was important that the ECB should not take on no significant risks of individual banks or countries, he added.

Further, Weidmann, who is also a Governing Council member, said the ECB should only buy low-risk securities, but he expressed concern regarding the adequate availability of such assets in the market to meet the central bank's plan targets.

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