Part of the ECB’s tool box is ABS buying and the EU may be about to agree on the scope of securities that will be acceptable under the new liquidity rules.
It looks like they will be pushing to allow loans to small businesses and consumers, such as car buyers, and they could account for around 15% of the buffers banks will have to hold under the rule. If it goes ahead the securities must be from the most senior part of a securitization to be eligible, and must have a maturity no longer than 5 years, according to documents seen by Bloomberg.
One of the issues that will be a sticky point for any ECB ABS/QE buying is what they will buy. If the rules are too loose on eligible securities it will just become another ticking time bomb down the road.
