* Look-through transparency for all ECB-ready ABS
* Loan-level disclosure project finished and CEO appointed
* Central bankers applied pressure to raise funds
By Owen Sanderson
LONDON, Nov 30 (IFR) - The European Central Bank's
loan-level data initiative for structured finance, which should
provide detailed loan data to the whole market through the
European DataWarehouse (ED), is ready for action.
The ED was established to ensure the ECB's loan information
- which it needs to monitor ABS collateral used for its repo
operations - is easily accessible to the whole market. The ED
will check data that comes in from issuers, ensuring full
compliance with the ECB's standard templates, and provide the IT
systems for data providers to hook into its systems.
The project is supposed to "create a central point (or
forum) where industries, associations and national agencies can
lodge their data and information in an open, transparent and
The ECB hopes this will boost private sector demand for
securitisation - allowing peripheral banks to replace some of
their EUR371.7bn of ABS-backed central bank repo funding with
transactions placed with third-parties. Issuers wanting their
securitisations issues to be ECB-eligible will have to provide
this data to the European DataWarehouse.
There will be a nine month phase-in period, during which the
ED will assign issuers a quality score for the data. And
existing ABS that does not comply with the terms of the
loan-level reporting will remain ECB eligible until the end of
Although the ED is operational, full functionality will come
online when the implementation period for loan reporting begins
on January 3 2013. Markus Schaber, formerly of the European
Investment Fund, has been appointed its CEO.
The nine month phase-in process for RMBS was scheduled to
begin on December 1, but the formal notification process for
changes to Eurosystem rules was not completed in time.
SME CLOs will have a smaller pushback, from January 1 to 3.
CMBS will need to have loan-level reporting in place by March 1,
instead of January 1. All other asset classes keep the
loan-level reporting deadline of January 1 2014.
Some issuers have already loaded their data to ED for extra
THE LONG LOAN LEVEL JOURNEY
The data initiative began in 2009, when regulators became
convinced that the securitisation industry needed to improve
disclosure on the assets which backed the securities if it was
to regain investor trust. Transparency became a major part of
the drive to re-regulate securitisation.
The ECB and the Bank of England decided to encourage
loan-level data through their collateral eligibility
requirements - if issuers could not provide the data, their
bonds would not be eligible central bank securities.
Various senior market participants were invited to help
draft templates to present loan level data in standard,
comparable format across Europe. Each jurisdiction records
different data about borrowers - and different information
depending on whether they are borrowing via credit card,
mortgage, or unsecured loan. This must be anonymous - but be
specific enough to be useful.
Following production of the templates, the ECB decided to
encourage the construction of a whole new piece of market
infrastructure to provide this data. Paul Burdell of Link
Financial, acting as an adviser to the ECB at this time, took on
the project, soon dubbed the European DataWarehouse. Eight
institutions drawn from the technical working groups managed the
procurement process, picking Sapient Global Markets as
The ECB maintained an arms-length distance from the project,
aiming to present the European DataWarehouse as a market-driven
Speaking on Thursday in Frankfurt, Peter Praet, chief
economist at the ECB, described loan-level data as a classic
collective action problem - no individual issuer had an
incentive to start making this data available, but official
sector organisations could act as catalysts to improve market
The central bank retained an observer role, since it
anticipated being a major user of the resulting data - indeed,
it is the only institution so far to have trialled access to the
data. No third party investors in ABS have yet approached the ED
about using the data.
The project has proved controversial, particularly with some
of the large UK issuers, because while the ECB was the main
driver of the project, the central bank refused to pay for it,
arguing that the industry needed to show willing.
Instead of being a public utility, ED is a profit-making
private sector company, paid for by a private share placement to
market participants, managed by Perella Weinberg. Shareholders
get a discount on submitting their data. The idea was a
co-operative system, analogous to SWIFT, the payments
communication standard owned by its member banks.
Loading loan-level data into the DataWarehouse is necessary
to make ABS central bank eligible, but can only be achieved by
paying ED a fee. One senior figure close to the project
described it as a toll-booth on the only route to a destination.
However, the profit rate is to be limited to 10% and is to be
used for reinvestment.
Initial target funding was EUR20m, though this was
subsequently revised to EUR11m. Fundraising for this smaller
amount was completed by July 2012, but 15 other institutions
have publically committed funds so far, with Dutch institutions
also involved, despite reports to the contrary.
The shareholder list, available on the ED website, is
heavily skewed towards peripheral institutions. Some firms were
initially reluctant to offer financial backing to the project -
Executive Board members of the ECB had to use their contacts
with senior bank management to encourage them to buy shares.
Despite this encouragement, some issuer communities decided
to only invest under the guise of existing market associations -
German banks under the banner of True Sale International and
Dutch banks through the newly minted Dutch Securitisation
ED will eventually have around 25 employees, who will
largely be working in specialist helpdesk roles, assisting
issuers with loading the data and investors with accessing it.