LONDON, April 15 (Reuters) - The European Central Bank is set to unveil plans for a data warehouse of underlying loans that back deals in the asset-backed securities (ABS) market, an initiative it hopes will revitalise the sector, sources said.
Industry sources said ECB President Jean-Claude Trichet will publish a letter inviting potential market participants on April 22. The move follows the central bank's statement in December requiring loan-level data on deals it accepts as collateral for repo lending to banks under its Eurosystems framework.
'The ECB recognises that transparency and access to historic, current and future data is one of the cornerstones to reopening the market, particularly in order to attract real money investors back to the sector,' Paul Burdell, CEO at Link Financial.
Loan-level data on ABS is commonplace in the U.S. where investors can find loan-by-loan standardised information. It is a prerequisite for investors performing cashflow analysis on deals.
From 2007, the ECB became the key provider of funding to banks which could no longer sell ABS to third parties following the collapse of investor confidence in the market.
It announced a consultation in December 2009, at the same time as the Bank of England, to find ways to enhance market transparency and restore confidence by allowing investors to make informed risk assessments.
Loan-level data is touted by some analysts as being key for investors to do their own credit research so they are not reliant on outside analysis such as the credit rating agencies.
Eight ABS originators and investors have formed an independent Market Group to oversee the tender process and selection of a constructor for an ABS data warehouse in response to the ECB's encouragement for a market-led solution.
The Market Group will issue a formal request for information on or around April 28, calling for market participants to express an interest in building the data warehouse, with a view to selecting a suitable candidate to do this in July 2011, ready for a July 2012 launch.
Since the announcement in December, the ECB has been pushing for the market to develop a central, single solution; but Trichet's letter will formally put an end to speculation about where the data would be hosted.
Residential mortgage-backed securities (RMBS) will be the first asset class to come under the ECB's loan-by-loan data requirements, with other classes of ABS to follow.
Burdel, whose firm is working alongside the Market Group in the data warehouse initiative, says that, once the warehouse is ready, market participants will be able to buy shares in the warehouse in exchange for voting rights and access to the ABS data at discounted rates.
The eventual constructor of the warehouse will receive a preferential ownership stake in the data warehouse company.
However, some have expressed concern that not all investors will have the resources to be able to utilise the data on offer.
'Small investment firms do not have the operational support to process and monitor large volumes of loan-by-loan data on a regular basis, especially for large, well-supported master trusts,' said Rob Ford, portfolio manager at TwentyFour Asset Management.
(Reporting by Helen Wray - IFR Markets, editing by Alex Chambers and Stephen Nisbet) Keywords: ECB SECURITISATION/ (helen.wray@thomsonreuters.com; tel. +44 207 369 7573) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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