Senior German politician calls for revival of asset-backed market

BERLIN, June 24 Tue Jun 24, 2014 12:57pm EDT

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BERLIN, June 24 (Reuters) - Germany should revive the asset-backed securities market, which fell into disrepute during the global financial crisis, to help small businesses, a senior member of German Chancellor Angela Merkel's conservatives said on Tuesday.

Europe's market for asset-backed securities still carries the stigma created by the crisis, which was triggered by doubts about the quality of assets in U.S. mortgage-backed securities. But the European Central Bank and the Bank of England last month set out proposals to resurrect the market to help the flow of money to business.

"We need to look for alternative financial instruments for the Mittelstand," Ralph Brinkhaus, conservative deputy parliamentary floor leader, said, referring to the small and medium-sized firms that form the backbone of the German economy.

"Securitisation could be a good solution to that," he told Reuters, referring to asset-backed securities, which are basically bundles of bonds and loans.

Small businesses around Europe have found it tough to get financing from banks which are still recovering from the after effects of the financial crisis.

Brinkhaus said the aim was not to deregulate the market but rather to ensure a high-grade and transparent product.

"We need to restore trust in this product through quality," Brinkhaus said, though he did not elaborate on what concrete measures politicians would take.

"The ball is now in the financial industry and the Mittelstand's court; it's up to them to make proposals on how current regulatory framework can be improved for loan securitisation."

On Monday, Germany's BdB banking association and the BDI industry association called for a revival of the asset-backed market, saying it could help to solve the credit crunch in crisis-stricken southern European countries. (Reporting by Matthias Sobolewski; Writing by Michelle Martin. Editing by Jane Merriman)

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