ECB’s Asset-Backed Bond Project Is Boycotted by Dutch Banks

A Dutch financial services lobby group said its members are boycotting a European Central Bank project to improve transparency in the 1.9 trillion-euro ($2.4 trillion) asset-backed securities market.

Robin Fransman, a director at the Holland Financial Centre 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 other lenders in other euro-region countries because they’re less reliant on collateralized central bank loans.

“We don’t understand why a commercial company has been set up for this purpose, the Dutch sector prefers a non-profit organization or an industry-run foundation to run the project,” Fransman said.

Lenders in Europe pledged about 351 billion euros of ABS last year, making the asset class the second-most popular form of collateral 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, central bank data show.

Access to All

Banks will from this year start to provide the ECB with details of loans backing asset-backed securities. 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 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, Fransman said.

The ECB said the European DataWarehouse is a market-led initiative. The Frankfurt-based bank has sought participants’ input, including public consultations, which it has taken into account in setting the loan information criteria, according to an ECB spokesman, who asked not to be identified citing the bank’s policy.

Data Timetable

The ECB’s data requirement will start by the end of this year and initially cover loans in residential mortgage-backed securities, Fernando Gonzalez, the head of risk strategy in the central bank’s 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 and insurers to law firms and supervisors including the Dutch securities regulator AFM and the Dutch central bank.

To contact the reporters on this story: Esteban Duarte in Madrid at eduarterubia@bloomberg.net; Maud van Gaal in Amsterdam at mvangaal@bloomberg.net

To contact the editors responsible for this story: Paul Armstrong at parmstrong10@bloomberg.net; Frank Connelly at fconnelly@bloomberg.net