Skip to main content

Newsroom

April 11, 2014

Europe’s top central banks push for high-risk loan return

“Europe’s two top central banks will on Friday make a joint push to revive an asset class that was vilified for its role in the financial crash in an attempt to kick-start lending to the region’s credit-starved companies.”

“In a draft paper seen by the Financial Times, the Bank of England and the European Central Bank call for the easing of “unduly punitive” rules that make it less attractive to buy packages of loans known as asset backed securities.”

“The paper, which is due to be published on Friday, is part of a campaign led by the ECB to distinguish high quality European debt that has been packaged up or securitised from US loans.”

“Despite much lower default rates than in the US, the European market for securitisation has all but closed for business since the crisis, when the practice of slicing and dicing of loans was blamed for spreading problems in the market for US subprime housing loans to the global financial system.”

“Despite its long-term social value, securitisation today suffers from stigma, reflecting both its adverse reputation among investors and conservatism among regulators and standard-setters,” the central banks say in the draft paper.

“They add: “Revitalising publicly-distributed ABS issuance on any meaningful scale would require concerted policy action in various fields and involving a range of official entities.”

“Banks use asset-backed securities, which can be created from bundles of loans for anything from mortgages to credit cards and cars, as a funding tool. Selling the securities would free up more money for loans to businesses and households.”

***

Read full length Financial Times article here.

In the News
Share

MEDIA REQUESTS

For media inquiries, please contact us at
press@bettermarkets.org or 202-618-6433.

Contact Us

For media inquiries, please contact press@bettermarkets.org or 202-618-6433.

To sign up for our email newsletter, please visit this page.

Name(Required)
This field is for validation purposes and should be left unchanged.

Sign Up — Stay Informed With Our Monthly Newsletter

"* (Required)" indicates required fields

This field is for validation purposes and should be left unchanged.

For media inquiries,

please contact press@bettermarkets.org or 202-618-6433.

Donate

Help us fight for the public interest in our financial markets, protecting Main Street from Wall Street and avoiding another costly financial collapse and economic crisis, by making a donation today.

Donate Today