Comments on: Euro Banks Tank as ECB Tightens Rules on Liquidity Facilities http://www.nakedcapitalism.com/2008/09/euro-bank-tank-as-ecb-tightens-rules-on.html Sun, 22 Nov 2009 02:09:47 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: Ginger Yellow http://www.nakedcapitalism.com/2008/09/euro-bank-tank-as-ecb-tightens-rules-on.html#comment-14510 Ginger Yellow Mon, 08 Sep 2008 09:10:00 +0000 http://www.nakedcapitalism.com/2008/09/euro-banks-tank-as-ecb-tightens-rules-on-liquidity-facilities/#comment-14510 "In future, a blanket 12 per cent haircut will apply, replacing a previous sliding scale of between 2 per cent and 18 per cent."<br/><br/>It's important to realise that the vast majority (I'm talking 95% plus) of ABS submitted to the ECB had the 2% haircut. The sliding scale only applied to fixed rate/zero coupon securities, and almost all euro denominated ABS is floating rate. <br/><br/>My take on this is that it's pretty much the least they could do without keeping an obviously and dangerously outdated regime in place. They haven't really touched the rating requirement, they have to a certain extent limited counterparty risk, but they haven't banned any asset classes or really prevented "abuses" of the system by non-Eurozone banks. That said, I'm in favour of allowing non-Eurozone collateral, but it should be reciprocated by other central banks. ECB liquidity has been a valuable means of improving investor demand for some ABS issues. Far better that Australian banks, say, are issuing in Europe than turning to the RBA instead. “In future, a blanket 12 per cent haircut will apply, replacing a previous sliding scale of between 2 per cent and 18 per cent.”

It’s important to realise that the vast majority (I’m talking 95% plus) of ABS submitted to the ECB had the 2% haircut. The sliding scale only applied to fixed rate/zero coupon securities, and almost all euro denominated ABS is floating rate.

My take on this is that it’s pretty much the least they could do without keeping an obviously and dangerously outdated regime in place. They haven’t really touched the rating requirement, they have to a certain extent limited counterparty risk, but they haven’t banned any asset classes or really prevented “abuses” of the system by non-Eurozone banks. That said, I’m in favour of allowing non-Eurozone collateral, but it should be reciprocated by other central banks. ECB liquidity has been a valuable means of improving investor demand for some ABS issues. Far better that Australian banks, say, are issuing in Europe than turning to the RBA instead.

]]> By: Observer http://www.nakedcapitalism.com/2008/09/euro-bank-tank-as-ecb-tightens-rules-on.html#comment-14239 Observer Fri, 05 Sep 2008 18:13:00 +0000 http://www.nakedcapitalism.com/2008/09/euro-banks-tank-as-ecb-tightens-rules-on-liquidity-facilities/#comment-14239 Don't know how to send you email, Yves, to suggest a headline item, so this will have to do: am I the only one who is freaked out about the rapidly strengthening dollar (coupled with oil in freefall for at least a short while more)? Given how everything is crosswired between FX and a gazillion derivative flavors but especially CDS in the unregulated frontier markets, and then tied back to approximately-real assets (what Bill Gross quaintly calls "delevering"), it's not even so much the direction but the rate-of-change that is worrisome. Don’t know how to send you email, Yves, to suggest a headline item, so this will have to do: am I the only one who is freaked out about the rapidly strengthening dollar (coupled with oil in freefall for at least a short while more)? Given how everything is crosswired between FX and a gazillion derivative flavors but especially CDS in the unregulated frontier markets, and then tied back to approximately-real assets (what Bill Gross quaintly calls “delevering”), it’s not even so much the direction but the rate-of-change that is worrisome.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/09/euro-bank-tank-as-ecb-tightens-rules-on.html#comment-14180 Anonymous Fri, 05 Sep 2008 03:33:00 +0000 http://www.nakedcapitalism.com/2008/09/euro-banks-tank-as-ecb-tightens-rules-on-liquidity-facilities/#comment-14180 Re: God only knows how much slippery behavior <br/><br/>The devil is in the details (ask Paulson) Re: God only knows how much slippery behavior

The devil is in the details (ask Paulson)

]]> By: Dean http://www.nakedcapitalism.com/2008/09/euro-bank-tank-as-ecb-tightens-rules-on.html#comment-14173 Dean Fri, 05 Sep 2008 02:37:00 +0000 http://www.nakedcapitalism.com/2008/09/euro-banks-tank-as-ecb-tightens-rules-on-liquidity-facilities/#comment-14173 Sometimes inspiration comes from a cacophony of alternatives:<br/><br/>http://www.youtube.com/watch?v=Rnqa1yVGsLg Sometimes inspiration comes from a cacophony of alternatives:

http://www.youtube.com/watch?v=Rnqa1yVGsLg

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