April 23 (Bloomberg) -- The European Central Bank said financial institutions will have to provide additional information on asset-backed securities they pledge as collateral in exchange for loans.
The Governing Council decided last week that banks will have to inform the region’s central banks, known as the Eurosystem, “one month beforehand of any planned modification to an ABS that it has submitted as collateral,” the ECB said on its website. Lenders will also have to inform the Eurosystem “upon submission of an ABS, of any modification made to that ABS in the six months prior to its submission, if the ABS is ‘own-used’.”
The ECB is trying to reduce the risk it has taken in providing banks with more than 1 trillion euros ($1.3 trillion) of cheap liquidity to avert a credit crunch and unlock financial markets. The Frankfurt-based central bank last changed the rules on the asset-backed securities it accepts in refinancing operations in October, when it gave itself more discretionary power to reject collateral if needed.
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