Monday, December 21, 2009

ECB moves towards forcing more ABS transparency

Original posted on Reuters by Krista Hughes:

At its mid-month meeting, the ECB's policymaking Governing Council decided to call for comments on banks' reporting of information about the securitised assets they then swap for ECB liquidity.

"The Governing Council, having assessed the need for surveillance of loan-level data, decided to launch a public consultation on the reporting of loan-level information for asset-backed securities (ABSs) in the context of the Eurosystem collateral framework," the ECB said.

The ECB recently tightened its rules for accepting ABS as security in its liquidity operations, but has also said more transparency about the way such assets are put together would help revive public confidence and trade.

Better information about individual loans, such as the value of the property backing a mortgage and whether borrowers have kept up repayments, could give the ECB and others valuing the loans a true value.

The ECB said in its monthly bulletin in May it was working with ratings agencies on plans to introduce loan-by-loan information in the ongoing surveillance process for ABS.

"These efforts will improve the quality of the surveillance process by allowing rating agencies to identify early any possible problems with the underlying assets backing the transactions," the May bulletin said.

"It is hoped that by improving transparency in the surveillance process, market participants can regain confidence in the work performed by rating agencies in the securitisation markets, thereby allowing their reactivation."

For the bulletin article, please see the ECB's Web site:

here

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