ECB Attempt to Boost Bond Transparency Boycotted by Dutch Banks
Dutch lenders are boycotting a European Central Bank project to improve transparency in the 1.9 trillion-euro ($2.4 trillion) asset-backed bond market.
Robin Fransman, director of the Holland Financial Centre lobby group in Amsterdam, said a commercial company shouldn’t have been chosen to run the initiative. Dutch banks are the euro region’s biggest sellers of asset-backed securities, according to data compiled by JPMorgan Chase & Co.
The European DataWarehouse, tasked by the ECB to collect details of underlying loans in ABS used as collateral for central bank funding, started selling shares in January to finance the project. The Dutch are in a stronger position than lenders in other euro-region countries because they’re less reliant on collateralized loans from the ECB.
“We don’t understand why a commercial company has been set up for this purpose,” Fransman said. “The Dutch sector prefers a non-profit organization or an industry-run foundation to run the project.”
Lenders in Europe pledged about 351 billion euros of ABS as central bank loan collateral last year, making the asset class the second most popular form of security after loans and deposits, ECB data show.
Financial firms in the Netherlands had deposited a net 16 billion euros at the end of April with the country’s central bank, which compares with average net borrowing of 264 billion euros by Spanish institutions in the same month.
Banks will from this year start to provide the ECB with details of loans backing ABS. 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.
The European DataWarehouse, which is advised by privately held Link Financial Ltd. in London, will charge a fee to collect the loan-level data on the ECB’s behalf and make it available to other clients, a person familiar with the matter said in March.
Dutch banks instead will disclose the information requested by the ECB in a central depository website “accessible to all” set up by the Holland Financial Centre starting Sept. 1, according to Fransman.
The ECB said the European DataWarehouse is a market-led initiative. The Frankfurt-based central bank has sought participants’ input, including public consultations, which it took into account in setting the loan information criteria, according to an ECB spokesman, who asked not to be identified citing bank policy.
The ECB’s data requirement will start by the end of this year and will initially cover loans in residential mortgage- backed securities, Fernando Gonzalez, the head of risk strategy in the risk management office, said June 13. Information on commercial mortgage-backed debt and bonds backed by loans to businesses will start in 2013, while reporting for other classes will begin in 2014.
Banks create ABS by pooling the proceeds of consumer and property loans, typically allowing them to raise money more cheaply than by issuing unsecured debt.
Holland Financial Centre’s participants range from banks to insurers and law firms, as well as supervisors including the Dutch securities regulator AFM and the Dutch central bank.