The European Central Bank said this morning that it would intensify its preparations to buy asset-backed securities in order to stimulate Europe's market for the assets and help boost the flow of credit to smaller companies.
In a prepared statement, ECB President Mario Draghi said that the bank would consider purchasing "simple and transparent asset-backed securities with underlying assets consisting of claims against the euro area non-financial private sector.”
He said the move would take into account "desirable changes in the regulatory environment", on which the euro zone central bank "will work with other relevant institutions".
However he reportedly said later that the central bank’s Governing Council had not discussed the scope of any ABS program at today’s meeting.
The ECB announced a number of other measures today to help boost bank lending, including cutting the interest rate on the main refinancing operations of the Eurosystem by 10 basis points to 0.15% and the rate on the marginal lending facility by 35 basis points to 0.40%. The central bank also took the unusual step of cutting the rate it pays banks to park funds overnight into negative territory, by 10 basis points to -0.10%.
Both the ECB and the Bank of England want European banks and investors to agree common standards for safer, “high quality” ABS as well as regulations based on the actual performance of deals in a given category. They believe this could help foster economic growth in the region by providing credit to firms that are too small to issue bonds in the capital markets.