ECB and BoE set proposals to boost EU securitisation

LONDON/FRANKFURT Fri May 30, 2014 5:00am EDT

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LONDON/FRANKFURT May 30 (Reuters) - The European Central Bank and Bank of England set out detailed proposals on Friday to boost the market for asset-backed securities in the European Union.

The so-called ABS market for packaged debt bundles of loans slumped after the 2008 financial crisis but is now seen as necessary to help build a stronger economy.

Last month the two central banks said public intervention to kick-start the market. They accused global regulators of taking too tough a stance on the sector.

The proposals in Friday's report aim to reduce the risk of securitised debt by limiting its tendency to concentrate risk in institutions vital to the financial system, as well as to make their performance more predictable.

"Involvement in this market by the authorities may be desirable to support its revitalisation in a more robust form," the paper said, adding it was now seeking industry feedback.

It suggested following the model already adopted for asset-backed securities eligible for central bank transactions, which aim to identify products that are simple, robust and transparent, enabling investors to accurately assess risks.

It also said they may warrant specific capital treatment and said that credit registers which provide data on whether small and medium-sized businesses default on loans should become more open.

* To read the full report, go to www.ecb.europa.eu/ or www.bankofengland.co.uk/ (Reporting by David Milliken and Eva Taylor)

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