ECB faces new collateral challenge

The good news for the European Central Bank is that the volume of ABS paper European banks will be repoing with it in 2009 will fall. The bad news is that this is not because of its revised – and supposedly tighter – collateral rules that are due to come into effect in February. It is for a far more straightforward reason – banks are running out of assets to repo. “There will be an easing in the use of the ECB’s repo scheme in 2009 as banks are starting to exhaust their available collateral,” says a European RMBS expert.