Euro system starts work on ABS’ collateral framework
24 April 2010
Following a public consultation the ECB Governing Council decided to proceed with the preparatory work for the establishment of loan-level information requirements. The work also addresses the technical implementation aspects and is expected to be completed by September 2010.
The Governing Council of the European Central Bank (ECB) has decided that work should begin on the establishment of loan-by-loan information requirements for asset-backed securities (ABSs) in the Eurosystem collateral framework. Having analysed the positive feedback received in the public consultation on the matter, the Governing Council decided that the ECB and the 16 national central banks of the euro area would proceed with the preparatory work for the establishment of loan-level information requirements.
On 23 December 2009 the ECB launched a public consultation on the establishment of loan-by-loan information requirements for ABSs. The consultation ended on 26 February 2010 and over 50 responses were received from a broad range of market participants. The vast majority of respondents support the initiative, as it would increase transparency, contribute to more informed risk assessments and help to restore confidence in ABS markets.
The preparatory work will begin immediately and should be completed by September 2010. It will address further the loan-level information requirements, as well as the technical implementation aspects covered by the public consultation. Subject to the approval of the Governing Council, market participants would have 12 months before the obligation to submit loan-level ABS information comes into force.
Summary of the Consultation :
The public consultation revealed very strong support for the initiative. The main reason given for supporting the initiative was the increase in transparency levels, which would contribute to more informed risk assessments, thereby helping to restoring confidence in ABS markets. In addition to expressing their strong support, respondents made a number of recommendations to the Eurosystem regarding specific implementation details that should contribute to a smoother introduction of ABS loan-by-loan data. In the remainder of this report, the responses to the questions are summarised and the main recommendations made by market participants are listed.
Market participants showed significant support for the initiative and confirmed that the Eurosystem would not face any major obstacles in introducing loan-level data requirements in its collateral framework. In view of this positive conclusion of the public consultation, on 22 April the Governing Council of the ECB agreed that the study phase of the loan level initiative could be considered complete and that the Eurosystem could proceed with its preparatory work for the establishment of loan-level information requirements. This preparatory period is expected to last approximately six months. It will be dedicated to further developing the ABS loan-level data requirements, as well as the technical implementation aspects that were mentioned in the public consultation, in particular:
(i) the gradual phasing-in of loan-level data requirements;
(ii) the risk control scheme applicable to ABSs for which loan-level data are temporarily not submitted;
(iii) the design of the data-handling infrastructure;
(iv) the final definition of the RMBS loan-level data template, taking into account the detailed technical comments received; and
(v) the possible future introduction of loan-level templates for other asset classes. This further technical preparatory work will be conducted by the Eurosystem in collaboration with market participants. Technical working groups composed of relevant market participants and Eurosystem experts will be created to fi nalise the different loan-level templates and tackle technical issues related to the initiative. It is envisaged that the Governing Council will assess the results of this preparatory work after summer 2010 and subsequently decide when to announce the loan-level data requirements.
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