News / Europe

ECB Will Start Buying ABS, Covered Bonds in October

President of European Central Bank Mario Draghi is on his way to a news conference in Frankfurt, Germany, Thursday,  Sept. 4, 2014, following a meeting of the ECB governing council.
President of European Central Bank Mario Draghi is on his way to a news conference in Frankfurt, Germany, Thursday, Sept. 4, 2014, following a meeting of the ECB governing council.

The European Central Bank will start buying securitized loans and covered bonds next month to help unblock lending in the euro zone, ECB President Mario Draghi said on Thursday.

“The Governing Council decided to start purchasing non-financial private sector assets,” Draghi told his monthly news conference after the ECB unexpectedly cut interest rates to new record lows.

He said the bank would buy broad portfolios of simple and transparent asset-backed securities and of euro-denominated covered bonds from October, with full details of the new programs to be given after the ECB's next meeting on Oct. 2.

Taken together with the ECB's new long-term loans to banks, to be offered for the first time later this month “the newly-decided measures ... will have a sizeable impact on our balance sheet”, Draghi said.

He said the ABS program, plans for which were announced by the ECB in June, “reflects the role of the ABS market in facilitating new credit flows to the economy”.

The programs are part of the ECB's broader efforts to boost lending, particularly to smaller and medium-sized companies, which form the backbone of the euro zone economy.

Banks create ABS by pooling various loans together and selling different tranches on to investors to lighten the load on their balance sheets, which allows them to issue new credit.

Some complex ABS structures played a part in sparking the global financial crisis. The European ABS market has still not recovered, in part because post-crisis regulatory changes have made the assets less attra7ctive to investors.

European Union finance ministers will meet on Sept. 13 in Milan to discuss rekindling securitization after issuance in Europe sank to 181 billion euros in 2013 from 711 billion euros in 2008. In contrast, the U.S. market has sprung back from 934 billion euros in 2008 to 1.5 trillion euros last year.

 

You May Like

For Lebanon-based Refugees, Desperation Fuels Perilous Passage

In a war that has caused an estimated three million people to flee Syria, efforts to make perilous sea journey in search of asylum expected to increase More

South African Brewer Tackles Climate Change

Mega-brewer SAB Miller sent delegates to climate summit in Peru, says it is one of many private companies taking their own steps to fight climate change More

Indonesia Reports Increase in Citizens Joining Islamic State

Officials say more than 350 of its citizens are now in Syria or Iraq to fight with Islamic State - 50 more than last month More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Refugees Living in Kenya Long for Peace in the Home Countriesi
X
December 16, 2014 2:14 PM
Kenya is host to numerous refugees seeking safe haven from conflict. Immigrants from Somalia face challenges in their new lives in Kenya. Ahead of International Migrants Day (December 18) Lenny Ruvaga has more for VOA News from the Kenyan capital.
Video

Video Refugees Living in Kenya Long for Peace in the Home Countries

Kenya is host to numerous refugees seeking safe haven from conflict. Immigrants from Somalia face challenges in their new lives in Kenya. Ahead of International Migrants Day (December 18) Lenny Ruvaga has more for VOA News from the Kenyan capital.
Video

Video Turkey's Authoritarianism Dismays Western Allies

The Turkish government has been defiant in the face of criticism at home and abroad for its raids targeting opposition media. The European Union on Monday expressed dismay after President Recep Tayyip Erdogan lashed out at Brussels for criticizing his government's action. Turkey's bid to be considered for EU membership has been on hold while critics accuse the NATO ally of increasingly authoritarian rule. Zlatica Hoke reports.
Video

Video US-China Year in Review: Hong Kong to Climate Change

The United States is pushing for a code of conduct to resolve territorial disputes in the South China Sea as it works to improve commercial ties with Beijing. VOA State Department correspondent Scott Stearns reports on a year of U.S. policy toward China from Hong Kong to climate change.
Video

Video Japanese Leader’s Election Win Raises Potential for Conflict with Neighbors

Japan’s Prime Minister Shinzo Abe and his allies easily won a two-thirds majority in parliament Sunday, even though the country has slipped into recession under his conservative policies. VOA’s Brian Padden reports from Seoul, that the prime minister’s victory will empower him to continue economic reforms but also pursue a nationalist agenda that will likely increase tensions with Japan’s neighbors.
Video

Video Nuba Mountain Families Hide in Caves to Escape Aerial Bombings

Despite ongoing peace talks between Sudan's government and the rebel Sudan People’s Liberation Movement-North, or SPLM-N, daily aerial attacks continue in South Kordofan province’s Nuba Mountains. Adam Bailes was there and reports for VOA that government forces are targeting civilian areas, rather than military positions, with their daily bombardments.
Video

Video Indonesian Province to Expand Sharia Law

Indonesia has the world’s largest Muslim population and a legal system based on Dutch civil law and Indonesian government regulations. But in a 2001 compromise with separatists, Aceh province in Sumatra island’s north was allowed to implement Sharia law. Since then, religious justice has become increasingly strict. VOA correspondent Steve Herman reports from Banda Aceh.
Video

Video Some Russian Businesses Thrive in Poor Economy

Capital flight, the fall in oil prices and Western sanctions are pushing Russia's staggering economy into recession. But not companies are suffering. The ruble’s drop in value has benefited exporters as well as businesses targeting increasingly frugal customers. VOA's Daniel Schearf reports from Moscow.

All About America

AppleAndroid