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12 March 2012

Reuters: Asset-backed securities seek new look to shed bad image


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Asset-backed securities (ABS), blamed for triggering the financial market chaos that has toppled banks and sucked in countries, are undergoing a brand makeover. In future, top-notch ABS may be known as PCS, or Prime Collateralised Securities.


The new brand is designed to polish the image of assets that could be used by the European Central Bank as security - a stamp of approval that would reassure investors who still associate them with the subprime US mortgage loans that sent shockwaves through banks in Europe and beyond after the last five years.

Its architects are optimistic the brand will be seen as low-risk, and have identified almost €1 trillion of securitised loans that might qualify for the PCS label.

That includes more than €750 billion of debt backed by mortgages, while some €100 billion of small business loan securitisations and a similar volume of securities backed by consumer debt and credit card loans could also qualify.

"There is a strong commitment to make this happen, including public comments of support from the ECB, European Commission ... and other authorities", said Sebastian Fairhurst, Secretary-General of the European Financial Services Round Table.

ECB President, Mario Draghi, said last month the central bank was not planning to loosen its collateral requirements further however, saying the next change in the rules should be a tightening.

Full article



© Reuters


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