Bloomberg News

ABS Sales Fall in Europe on Central Bank Funding, S&P Says

August 22, 2012

Sales of asset-backed bonds are falling in Europe as issuers take advantage of cheap central bank funding, according to Standard & Poor’s.

Banks sold 44 billion euros ($55 billion) of bonds backed by mortgages, auto loans and credit-card payments in the first seven months of the year, about 10 percent lower than for the same period of 2011, S&P said, citing data from JPMorgan Chase & Co. Almost 50 percent of the notes sold were backed by prime U.K. home loans.

Volumes of ABS plunged about 80 percent in the five years since the financial crisis started, after previously fueling economic growth by allowing lenders to refinance the cheap credit they extended. The European Central Bank has provided lenders with 1 trillion euros of low-cost financing in the past year.

“Securitization issuance volumes remain under pressure in Europe, a victim of banks’ ongoing efforts to shrink their balance sheets, large central bank funding programs, and regulatory uncertainty,” S&P analyst Mark Boyce wrote in a report.

Regulatory changes will shape future demand for ABS bonds, S&P said, with treatment of securitized assets yet to be finalized in the Basel III and Solvency II directives.

To contact the reporter on this story: Tom Freke in London at tfreke@bloomberg.net


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