Altomonte, C. & Bussoli, P. (2014) “Asset-backed securities: The key to unlocking Europe’s credit markets?“, Bruegel Institute, 24 Ιουλίου.
The European market for asset-backed securities (ABS) has all but closed for business since the start of the economic and financial crisis. ABS (see Box 1) were in fact the first financial assets hit at the onset of the crisis in 2008. The subprime mortgage meltdown caused a deterioration in the quality of collateral in the ABS market in the United States, which in turn dried up overall liquidity because ABS AAA notes were popular collateral for inter-bank lending. The lack of demand for these products, together with the Great Recession in 2009, had a considerable negative impact on the European ABS market.
The post-crisis regulatory environment has further undermined the market. The practice of slicing and dicing of loans into ABS packages was blamed for starting and spreading the crisis through the global financial system. Regulation in the post-crisis context has thus been relatively unfavourable to these types of instruments, with heightened capital requirements now necessary for the issuance of new ABS products.
And yet policymakers have recently underlined the need to revitalise the ABS market as a tool to improve credit market conditions in the euro area and to enhance transmission of monetary policy. In particular, the European Central Bank and the Bank of England have jointly emphasised that:
“a market for prudently designed ABS has the potential to improve the efficiency of resource allocation in the economy and to allow for better risk sharing… by transforming relatively illiquid assets into more liquid securities. These can then be sold to investors thereby allowing originators to obtain funding and, potentially, transfer part of the underlying risk, while investors in such securities can diversify their portfolios… This can lead to lower costs of capital, higher economic growth and a broader distribution of risk” (ECB and Bank of England, 2014a).
Σχετικές αναρτήσεις:
- Meyer, H. (2014) “How Money And Credit Work“, Social Europe Journal, 23 Ιουλίου.
- Martin, Α. & Venture, J. (2014) “Managing credit bubbles“, VoxEU Organisation, 05 Ιουλίου.
- Kerry, W., Portier, J., Ruggerone, L. & Verkoren, C. (2014) “What a Drag: The Burden of Nonperforming Loans on Credit in the Euro Area“, iMFdirect, 23 Ιουνίου.