Milan, 15/09/2014 (Agence Europe) - The European Central Bank (ECB) will launch its extensive purchasing programme for assets based securities (ABS) even if member states do not provide public guarantees for the less secure tranches of these assets.
On Friday 12 September at the end of the Eurogroup meeting in Milan the president of the ECB, Mario Draghi, stated that “the programme will be launched regardless of guarantees”. The estimated value of this programme announced at the beginning of September is €1,000 billion. The ECB will clarify details regarding the senior tranches in October, which could be expanded to more at-risk tranches if national guarantees are introduced, he added (see EUROPE 11148).
Speaking on the same day, the president of Eurogroup, Jeroen Dijsselbloem, said that his country was not interested, and speaking in his capacity as Dutch finance minister he added, “do I support additional guarantees from the government on these products? The answer would be no.” Germany and France share this approach and on Saturday 13 September, the French Treasury Minister, Michel Sapin, indicated that “securitisation is one aspect that contributed to the destabilisation of the financial system. It is very important to identify the subject and for it to be transparent, of a good quality and for the risks to be assessed” (our translation).
On Saturday, the Spanish Minister for Finance, Luis de Guindos, indicated that he was looking at possibilities for providing national guarantees if other countries did likewise and provided assurances that the Spanish banks would not be put at a disadvantage. Some countries are already granting guarantees for certain kinds of ABS based on funding to SMEs, explained Draghi. ECB vice president, Vitor Constâncio, referred to the US system where 85% of the securitised mortgage loans market benefited from public guarantees from Fannie Mae and Freddie Mac.
Draghi also said that he was “confident there would be a regulatory evolution in the way ABS will be treated. It will contribute to make the market bigger and deeper”. The Commissioner for the Internal Market, Michel Barnier, also took this line and indicated that “the time has come to take initiatives to adapt legislation in order to help stimulate growth”. In this connection he mentioned the ongoing work to re-evaluate the European securitisation markets as part of the measures to facilitate prudential regulation in the insurance sector. During the informal Ecofin Council, the Italian presidency describes the work currently being taken to regenerate the European securitisation market (see EUROPE 11140). (MB and EL)