Why Is Bank of America Buying European Debt?
While a string of mortgage-related lawsuits have forced the bank to shrink its balance sheet since 2008, Bank of America’s (NYSE:BAC) Chief Executive Officer Brian Moynihan has attempted to make the bank a smaller and more efficient business. However, that strategy has not prevented the bank from becoming the biggest buyer of European debt.
Why is Bank of America Buying European Debt?
Across Europe, banks have been working to reduce the percentage of debt on their balance sheets, raise capital, and comply with stress tests by selling loan portfolios. “Portfolio sales are a direct result of the financial crisis and have not been seen on this scale before,” as Reuters reported. “European banks have had to change their approach to how quickly they divest assets and realise losses to give better visibility and accountability on their equity base to shareholders and regulators.”
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Since late 2011, Bank of America Merrill Lynch has bought 7.3 billion euros, or $9.44 billion, of loans from deleveraging European banks, like the Royal Bank of Scotland (NYSE:RBS)…