Supply at risk as TLTRO to reduce incentives for SME ABS to ‘zero’

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By Tom Porter
21 Jul 2014

The way borrowing allowances are calculated under the European Central Bank’s latest flagship cheap funding programme may put ABS at a further disadvantage to covered bonds, according to analysts at Bank of America Merrill Lynch, who are concerned their recently lowered 2014 supply forecast for securitization in Europe should be cut again as a result.

BAML’s structured finance team slashed their full year forecast from €120bn-€140bn to just €90bn earlier this month — still at the bullish end of analyst estimates — citing the forthcoming targeted long-term refinancing operations (TLTROs) as one of the key factors behind the decision.

The TLTROs, announced ...

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