ECB Said to Join BOE in Call for Better-Functioning ABS Market

The European Central Bank and the Bank of England will today stress the need for a better-functioning European market for asset-backed securities in the first of a series of joint papers, a person familiar with the matter said.

The document outlines the current state of the securitization market and identifies areas where improvements could be made, the person said, asking not to be identified because the paper hasn’t yet been released. While the central banks refer to regulatory requirements and treatment of ABSs by rating companies, they stop short of making concrete recommendations, the person said.

The ABS market has taken center stage this month after ECB policy makers said they are discussing whether to buy a mix of private assets and sovereign debt in a bid to boost inflation and revive lending in the 18-nation currency bloc. Andy Haldane, the BOE’s executive director for financial stability who will become chief economist from June, said this month that his institution intends to “support actively” initiatives to design securitizations.

In the paper, the ECB and the BOE argue that ABSs in Europe have done quite well and may help stimulate credit supply, the person said. The central banks are preparing a more detailed report to be released later this year, the person said. While the U.K. isn’t part of the euro area, BOE Governor Mark Carney heads the Financial Stability Board, a group of global regulators and central bankers that makes recommendations on financial rules.

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