Reuters

(Reuters)

Asset Managers to Assist ECB with ABS Purchases in November

Politics Reuters

The European Central Bank hired four major asset managers to carry out from November its purchases of securitised private debt, one of the stimulus measures the bank hopes will stave off deflation in the euro zone.

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The ECB said on Thursday it had chosen Deutsche Bank ING, State Street and Amundi to support its efforts to buy asset-backed securities.

The ECB has already started buying covered bonds - debt backed by pools of home or commercial properties - and said it expected to launch ABS purchases next month.

"The executing asset managers' role will be to conduct the eligible ABS purchase transactions on explicit instructions from, and on behalf of, the Eurosystem (of euro zone central banks), which will undertake price checks and due diligence prior to approving the transactions," the ECB said in a statement.

The asset managers, the list of which was first reported Germany's Manager Magazin Online, have been hired for a year and will buy the assets on the account of the ECB. Potential losses or gains will be shared among the bloc's 18 national central banks.

The ECB did not say how much the contracts were worth.

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The ECB's decision to involve outside help mirrors a similar move by the U.S. Federal Reserve in 2008 when it embarked on large purchases of agency mortgage-backed securities to keep interest rates low and spur the U.S. economy.

The Fed back then hired fixed income investment firm Pimco, Goldman Sachs, BlackRock and Wellington Management for about a year, after which it conducted the purchases alone.

A 2011 U.S. Government Accountability Office report showed that Pimco, Goldman and BlackRock were paid $11.2 million apiece for their services to the Fed in 2009. Wellington was paid $26.6 million under an extended contract to March 2010.

DIFFICULT TARGET

With its latest stimulus measures the ECB hopes to revive the euro zone economy, mired in low growth and weak inflation.

The purchases are part of a plan to bring the ECB's balance sheet back to levels last seen in early 2012 along with offers of four-year loans, but there is doubt among policymakers and experts whether these steps are sufficient to get there.

Several sources told Reuters last week that the ECB is considering buying corporate bonds on top of ABS and covered bonds and may decide on the matter as soon as December.

The ECB balance sheet reached around 3 trillion euros in early 2012 and stood at just above 2 trillion euros as of last week.

A Reuters poll showed earlier this month the ECB was likely to spend around 250 billion euros buying ABS and covered bonds and another poll earlier this week showed banks would borrow another 175 billion euros in four-year loans in December.

They took 82.6 billion, less than expected, when the ECB first offered the extraordinarily cheap loans in September.

These estimates fall short of the roughly 1 trillion euro expansion the ECB is aiming for, even more so if taken into account that its previous crisis funds, handed out in 2011/2012 and of which banks still hold about 300 billion, will mature early next year. (Reporting by Kathrin Jones, Paul Carrel and Eva Taylor in Frankfurt, Alexandre Boksenbaum-Granier in Paris; Editing by Toby Chopra)