ECB starts talks on promoting securitisation market

Thu May 2, 2013 9:42am EDT

LONDON, May 2 (IFR) - Mario Draghi announced in the ECB press conference on Thursday afternoon that the ECB governing council would start consultations with other European institutions on initiatives to promote a functioning market for asset-backed securities collateralised by loans to non-financial corporations.

In questioning, Draghi said that the ECB had been working with the European Commission and European Investment Bank on initiatives to promote the market, but said that the ECB was the wrong institution to purchase or guarantee ABS.

He said since the ECB was not in the business of cleaning bank balance sheet or monetary financing, there were a limited number of actions it could take, which included buying SME or residential loans.

He also explained that structurally in Europe these instruments were not priced through capital markets, and that the ECB was looking for a method to package the loans.

He described the ABS market as "long-dead", and said that the regulatory situation and low interest rates were restricting the market.

The ECB had been widely expected to announce an initiative to promote lending to SME, of which securitisation could have formed a part. Yves Mersch, a member of the governing council, wrote in the Financial Times last week that "to kick-start the flow of credit, a new European asset class of securitised loans to small business could be created".

Mersch also said that "Funding aid for sound pools of small business loans could be provided by development banks on the national and European level, possibly supported by liquidity from the ECB within its mandate." (Reporting By Owen Sanderson, editing by Anil Mayre)

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