The Dow Jones Newswire reports that according to Der Spiegel,
Skeleton risks amounting to several hundreds of billions of euros are on the balance sheet of the European Central Bank, magazine Der Spiegel writes in a preview of its edition to be published Monday.
Those risks arise because banks, above all from Greece, Ireland, Portugal and Spain, have provided as collateral asset-backed securities that are unfit for central bank loans as their debt rating is low or non-existent, the magazine says.
That way, the banks are able to receive more financing from the ECB, Der Spiegel says.We now find out that there are several hundred billion euros of asset-backed securities that are unfit for central bank loans regardless of the size of the haircut on the collateral. Hence, the ECB has a very large incentive to get the market going so that these securities can be purchased by investors from the issuing banks and the ECB can stop funding the banks.
Given this incentive, the ECB should be doing everything in its power to make sure that the ABS data warehouse is successful. Where success is not simply that a database is constructed, but rather that investors trust the data and are willing to end their buyers' strike. If investors do no trust the data, they will not return to the structured finance market.
To date, your humble blogger is the only one in the world talking about a database that is likely to be trusted (no conflicts of interest with existing market participants and availability of all the useful, relevant data fields).