ABS Loan-level Initiative

Introduction

The ABS loan-level initiative establishes specific loan-by-loan information requirements for asset-backed securities (ABSs) accepted as collateral in Eurosystem credit operations. It will increase transparency and make available more timely information on the underlying loans and their performance to market participants in a standardised format. In the past, assessments of asset-backed securities have been hampered by the lack of standardised, timely and accurate information on single loan exposures. The Eurosystem believes that the new data requirements will help both investors and third-party assessment providers with their due diligence. Ultimately, more transparency will help to restore confidence in the securitisation market.

The Eurosystem investigated the usefulness of ABS loan-by-loan information for market participants via a public consultation and received overwhelming support for the initiative.

Main objectives

The loan-level initiative aims to:

1. improve transparency in ABS markets by requiring loan-by-loan information to be available and accessible to market participants on an ongoing basis. This is considered necessary to revive the ABS markets;
2. facilitate the risk assessment of ABSs as collateral used by Eurosystem counterparties in monetary policy operations.

Introduction of ABS loan-level data requirements

The Eurosystem will take into account loan-level data to determine whether ABSs are eligible as collateral in its credit operations. Via its collateral framework, the Eurosystem can help to improve market functioning and the transparency of the securitisation structures.

The Eurosystem intends to introduce the loan-by loan information requirements for residential mortgage-backed securities (RMBSs) first and then gradually to other asset classes, such as commercial mortgage-backed securities (CMBSs) and small and medium-sized enterprise (SME) transactions. The requirements will apply to existing and newly issued ABSs and are expected to be introduced in the 18 months following the announcement on 16 December 2010.