ECB may buy 'simple and
transparent' ABS, says Mersch
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[June 11, 2014]
BARCELONA (Reuters) - The
European Central Bank may buy "simple and transparent"
asset-backed securities (ABS) to help achieve its target
of delivering price stability to the euro zone, ECB
Executive Board member Yves Mersch said on Wednesday.
In a speech entitled "Next steps for European securitisation
markets", Mersch said the ECB wanted a more holistic approach to the
regulatory treatment of ABS in Europe and greater transparency of
their treatment by ratings agencies.
"There is a growing consensus that an instrument once seen as part
of the problem could in fact be part of the solution," he said of
talks about ABS in European policymaking circles.
The ECB included the possibility of ABS purchases in a package of
measures it announced last Thursday to pump money into the sluggish
euro zone economy.
Europe's ABS market has not recovered from the stigma created by the
global financial crisis, which was triggered by doubts about the
quality of assets in supposedly rock-solid U.S. mortgage-backed
The ECB and the Bank of England aim to get European banks and
investors to agree common standards for safer ABS, which could help
build a stronger economy by providing credit to firms that are too
small to raise investment funds direct from capital markets.
"We have to work in tandem with the markets, see what the market
reaction is," Mersch said of ECB preparations to buy ABS.
"Obviously we will not go into the area of buying the equity tranche.
Anything else beyond has to be seen to be under discussion," he
Substantial efforts were underway to improve transparency and
disclosure requirements of ABS across the EU, Mersch said.
However, he did not believe the Basel Committee of banking
regulators from nearly 30 jurisdictions would rush to define
high-quality ABS any time soon.
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Should it become clear that it would take too long to improve the
regulatory requirements for ABS on a global scale, Mersch said
Europe could go it alone.
"So if we see the global approach will not be conducive to helping
the recovery in the European economic area, we would have to
consider whether a more European approach would be helpful," Mersch
Greater standardisation of ABS products was key to stimulating
greater activity in the market, he added. He suggested streamlining
reporting requirements or providing standardised ABS prospectus
Mersch also called for ratings agencies to provide more transparency
on how they derive ratings for ABS products.
(Reporting by Paul Day; Writing by Paul Carrel; Editing by Toby
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