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The ECB said in its statement Thursday that it would now accept asset-backed securities with A ratings from at least two ratings agencies, instead of requiring two AAA ratings. The ECB also said it would give out more credit on each eligible asset-backed security that banks use as collateral to get loans. To protect itself from losses, the ECB does not hand out 100 cents of credit for every euro of collateral, but deducts a percentage -- known as a haircut -- as insurance. Haircuts can range from tiny slices such as a 0.5 percent haircut on short-term, safe investments to 44 percent when it loans against longer term, less secure securities. The bank also said it is looking at accepting even lower-rated kinds of asset-backed securities known as mezzanine tranches.
[Associated
Press;
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