Regular readers know that 'when' is as or more important than 'what' when it comes to disclosure.
Why this is true bears repeating.
The European Central Bank will start requiring lenders to provide data on the loans in asset-backed securities used as collateral for funding by the end of this year.
The data requirement will initially cover loans in residential mortgage-backed securities, pending the approval of the ECB’s governing council, said Fernando Gonzalez, the bank’s head of strategy....
Loan-level reporting for commercial mortgage-backed securities and bonds backed by financing to small and medium- sized businesses will start in 2013, he said. Loan reporting for other classes of securities such as bonds backed by car loans will start in 2014.
The Frankfurt-based central bank is seeking to improve the quality of the assets it takes on as loan security while improving confidence among investors.To date, the ECB has endorsed an effort by the Market Group to create an ABS data warehouse. This data warehouse will provide loan level data on a quarterly basis.
This reporting frequency is even worse than the once-per-month reporting that gave rise to the Brown Paper Bag Challenge and that is the frequency of reporting that is used for opaque, toxic sub-prime mortgage-backed securities.
If the ECB ever wants to improve the quality of the assets on its balance sheet, it must require observable event based reporting. As this is the reporting frequency that is necessary so investors can see the collateral as if it were in a clear plastic bag and know what they own.
Until the ECB requires observable event based reporting, it and the few buyers still left in the market will simply be blindly betting on the value of the ABS securities.