The European Central Bank announced a relaxation of its criteria for repo eligibility on Friday.

It will now consider auto, leasing, consumer finance and CMBS loans that are senior and have a current rating of triple-B minus for eligibility, according to Barclays Capital report published Monday.

The current requirements are that the bonds be senior, rated triple-A at origination and single-A minus currently.

Although the changes are not likely to impact outstanding CMBS, Barclays securitization analysts believe it might allow for the issuance of new CMBS.

Auto loan, leasing, consumer finance and CMBS which have a second best rating of at least 'single-A' will be subject to a valuation haircut of 16%.

RMBS, SMEs, auto, leasing and consumer finance ABS that have a second-best rating of at least 'triple-B' will be subject to a valuation haircut of 26% and for CMBS with a similar rating, a haircut of 32% would be applied.

"In our view, the loosening of the eligibility criteria is not a sign of the ECB taking a fresh and more positive view on ABS, but rather a side product of the funding pressure faced by peripheral banks, some banks running out of eligible collateral, and the fact that sovereign downgrades increasingly result in rating caps for structured finance transactions," analysts in the report said.

 

 

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