It will therefore be essential to better understand the factors that still constrain the recovery in this market and why investors are shying away, despite proven good performance and very few defaults on European ABSs. The regulatory treatment of ABSs, in particular the  BIS central bankers’ speeches  1  proposed regulatory capital charges for banks and insurers, could be a factor, as could a lack of secondary market liquidity and the relative opacity of the loans packaged in an ABS. In this respect, let me also mention the Eurosystem’s ABS loan-level initiative. In November 2012 the ECB informed the public about the implementation of loan-level data reporting requirements for asset-backed securities as part of the Eurosystem’s collateral framework.1 The ABS loan-level initiative makes use of the European DataWarehouse, the single loanlevel data repository for the handling of loan-level data reporting, which became operational on 3 January 2013. As a consequence, for residential mortgage-backed securities and for asset-backed securities whose cash-flow-generating assets comprise loans to SMEs, the reporting requirements became mandatory as of 3 January 2013. Commercial mortgagebacked securities must comply as of 1 March 2013, and other asset classes (auto loans, consumer finance loans, leasing receivables) as of 1 January 2014. While the ECB launched this initiative in the context of its collateral framework, a positive externality is that the initiative should also support the revival of this market segment by increasing its transparency and therefore investor confidence.

Further, non-standard measures – most recently, the Outright Monetary Transactions (OMTs) – have significantly contributed to an improved euro area financing environment, mainly stemming from an improvement in financial market sentiment and an alleviation of vulnerabilities affecting the supply of bank credit to firms and households. In addition, the OMTs announcement has helped to narrow sovereign spreads and to restore investor confidence. However, the ECB’s (non-standard) measures can only be temporary solutions. Most importantly, market participants have to continue their efforts to facilitate the transition to a less central-bank reliant, more market-based financial system, for which the ECB’s measures, as well as the recent progress concerning the Single Supervisory Mechanism, have hopefully laid the foundations. One market segment that suffered considerably during the financial crisis was the market for asset-backed securities (ABSs), the revival of which I consider essential for the provision of finance to the corporate sector. Given the restricted funding sources and elevated bank funding needs, a trend towards more disintermediation from larger corporate issuers has been observed in recent years, and this trend will most likely continue. By contrast, small and medium-sized enterprises (SMEs) are more dependent on their respective domestic banking sectors and are subject to tighter credit conditions than larger firms that have greater access to global financial markets. The question arises as to how these restrictions could be overcome. A reopening of the ABS market may be one way of enhancing funding conditions for SMEs.