ECB delegating more asset-backed security buying to national central banks

The European Central Bank needs more time to assess whether to beef up its asset-buying programme, ECB President Mario Draghi said on Wednesday, confounding some expectations that an expansion of quantitative easing may be imminent. 

PHOTO: AFP

SEP 23, 20156:30 PM

[FRANKFURT] The European Central Bank is delegating a greater proportion of its buying of asset-backed securities to national central banks after initially outsourcing most of it to private asset managers, it said on Wednesday.

The ECB has been trying to inject new life into the ailing ABS market, buying on average 1.2 billion euros worth of such securities a month since November 2014 as part of its quantitative easing programme aimed at reviving inflation in the euro zone.

But its success so far has been mixed, with the ABS market struggling for growth and inflation in the euro zone stubbornly low.

The ECB, which initially outsourced most of the buying to external asset managers, plans to gradually delegate it to national central banks once they have built up the capacity to handle the work.

The Bank of France was the first to start buying ABS in its domestic market when the programme started, and it will now be able to carry out purchases in Finland, too.

It will be joined by the central bank of Belgium, which will buy ABS in its home market. "The Governing Council...decided to increase the proportion of purchases by national central banks rather than external managers in the Asset-Backed Securities Purchase Programme," the ECB said. "As of 27 October 2015, Banque de France (with an increased number of jurisdictions covered) and Nationale Bank van België/Banque Nationale de Belgique will both act as Eurosystem asset managers executing purchases."

But the ECB will still be asking Amundi and NN Investment Partners, in which Dutch group ING owns a stake, to do some of the buying. An ECB spokesperson said its contracts with the two asset managers had been extended.

The European ABS market is struggling for growth partly due to hefty capital charges for insurers and banks which hold such instruments on their balance sheets.

Around 80 billion euros worth of ABS was placed last year and some analysts had expected 100 billion euros or more of issuance in 2015. But at the current rate it will probably fall short of that, according to an IFR analysis.

At its peak, the ABS market saw volumes of 1.1 trillion euros in 2008, according to research group Bruegel.

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