(By Kevin Donovan) As the Fed keeps "Twisting," the European Central Bank is now willing to dance with new partners.
The ECB said today it has lowered the eligibility requirements for asset-backed securities that can be used as collateral by banks seeking ECB loans. The move is another attempt to shore up banks in the Eurozone and has boosted the Euro in foreign-exchange trading. In the U.S. stocks are up.
In a statement today, the ECB said its Governing Council "has reduced the rating threshold and amended the eligibility requirements for certain asset-backed securities (ABSs). It has thus broadened the scope of the measures to increase collateral availability which were introduced on 8 December 2011 and which remain applicable. "
"In addition to the ABSs that are already eligible for use as collateral in Eurosystem operations, the Eurosystem will consider the following ABSs as eligible:
"Auto loan, leasing and consumer finance ABSs and ABSs backed by commercial mortgages (CMBSs) which have a second-best rating of at least "single A" in the Eurosystem's harmonised credit scale, at issuance and at all times subsequently. These ABSs will be subject to a valuation haircut of 16%.
"Residential mortgage-backed securities (RMBSs), securities backed by loans to small and medium-sized enterprises (SMEs), auto loan, leasing and consumer finance ABSs and CMBSs which have a second-best rating of at least "triple B" [2] in the Eurosystem's harmonised credit scale, at issuance and at all times subsequently. RMBSs, securities backed by loans to SMEs, and auto loan, leasing and consumer finance ABSs would be subject to a valuation haircut of 26%, while CMBSs would be subject to a valuation haircut of 32%."