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Thursday, October 2, 2014

Here It Is --- The ECB's Plan For Buying Asset-Backed Securities!

In my recent post on the subject, I had expressed anxiety about the unveiling of the ECBs plan for buying asset-backed securities (ABS) from banks. Well, the anxiety is over; the plan is out for everyone to review in detail.

You won't find all that much exciting, new information in the plan. Essentially, the ECB is saying "we will buy directly from banks only such assets which we would have accepted as collateral for funding, anyway". So no big change. There is a bit of an exception for Cyprus and Greece because, to date, the ECB has not accepted Greek collateral but they will now consider purchases of Greek assets. Ok; no big deal. Since the ECB has put the focus on buying only senior tranches, there won't be all that much to buy in Greece.

The ECB has suggested that they would also consider buying junior tranches if satisfactorily guaranteed but they will announce at a later stage what such a satisfactory guarantee is.

Bottom-line: the ECB is apparently not starting another sub-prime Ponzi-scheme, which is good news. The bad news for the banks is that, without such a sub-prime Ponzi-scheme, they really won't get rid of their problem assets.


  1. Bad news for Samaras. Draghi said he may buy greek assets, only if Greece is in a "program" (memorandum). So no troika, no purchase! So now Samaras will have the greek bankers pressuring him to continue with the troika...

  2. You say "The ECB is apparently not starting another sub-prime Ponzi-scheme."
    I hope that your optimism is justified: But I am afraid that sooner or later we will here such phrases as
    "more flexibility is needed",
    "this is a particular situation which needs particular measures",
    "Greek securities are not valued correctly by the markets and the ECB must do something to overcome market pessimism"
    "Greece did not stick to the memorandum, but there is significant progress" and so on, and then the rules will be interpreted more and more softly..