IMF Wants ECB To Ease ABS Rules

A senior International Monetary Fund official has backed the European Central Bank’s efforts to encourage trading in asset-backed securities (ABS) in Europe by easing rules for low-risk debt packages.

The ECB and the Bank of England presented a joint paper last week on their initiative to kick-start the shrinking market for packaged debt.

The ECB wants to revive the market as a means of unlocking lending to smaller and mid-sized firms, which form the backbone of the euro zone economy.

ABS got a bad name when some particularly complex securities played a central role in triggering the financial crisis of the late 2000s.

Jose Vinals, director of the IMF’s monetary and capital markets department, said it could now be useful to ease restrictions on less complex securitisation products.

“It could be very helpful to adjust the regulatory treatment so that for safe asset-backed securities, such as those in Europe, risk weights apply that better reflect the low risk compared to the complex structures in the United States,” he told German newspaper Boersen Zeitung in an interview released on Monday.

However, he said the simplicity and transparency of the products should be improved further and added that Europe should not push ahead alone with new regulations.

“I would prefer a global solution,” he said.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza