ECB Officially Announces Easing Of Collateral Rules, Confirms Europe Has Run Out Of Assets

Tyler Durden's picture




 

The headline which paradoxically ramped stocks yesterday, is back:

  • ECB DECIDED ON ADDL MEASURES TO IMPROVE BANKING SECTOR ACCESS
  • ECB DECIDE TO REDUCE RATING THRESHOLD FOR SOME ABS
  • ECB SAYS AUTO-LOAN ABS WILL BE ELIGIBLE
  • ECB SAYS IT WILL APPLY 16% HAIRCUT TO A RATED ABS COLLATERAL
  • ECB TO BROADEN SCOPE OF MEASURES INTRODUCED DEC. 8, 2011
  • ECB SAYS BBB-RATED RMBS FACE 26% HAIRCUT
  • ECB SAYS RMBS OF AT LEAST BBB MAY BE ELIGIBLE
  • ECB SAYS BBB-RATED CMBS FACE 32% HAIRCUT

Why paradoxically? Because once again Europe confirms it has run out of actual money-good assets that can be pledged. Going forward, every repo transaction will merely be a dilutive one: those deposits you have with bank XYZ? Why, they are backed by the kitchen sink. Literally.

As for the rating of the actual collateral? Why that will come from the ECB itself of course.

Goodbye European Central Bank. Hello Salvation Army Bank.

or in other words: 

"THE ECB RATES THIS SPIDERMAN TOWEL-BACKED CURRENCY AAA+++

Meet Europe's new currency:

Full text from the bank which will now outbid anyone for anything on Ebay

Further Measures To Lift Collateral Availability

The European Central Bank on Friday announced further measures to increase collateral availability for counterparties. Following is the text of the ECB's press release: 

On 20 June 2012 the Governing Council of the European Central Bank (ECB) decided on additional measures to improve the access of the banking sector to Eurosystem operations in order to further support the provision of credit to households and non-financial corporations.

The Governing Council has reduced the rating threshold and amended the eligibility requirements for certain asset-backed securities (ABSs). It has thus broadened the scope of the measures to increase collateral availability which were introduced on 8 December 2011 and which remain applicable. In addition to the ABSs that are already eligible for use as collateral in Eurosystem operations, the Eurosystem will consider the following ABSs as eligible:

1. Auto loan, leasing and consumer finance ABSs and ABSs backed by commercial mortgages (CMBSs) which have a second-best rating of at least "single A"1 in the Eurosystem's harmonised credit scale, at issuance and at all times subsequently. These ABSs will be subject to a valuation haircut of 16%.

2. Residential mortgage-backed securities (RMBSs), securities backed by loans to small- and medium-sized enterprises (SMEs), auto loan, leasing and consumer finance ABSs and CMBSs which have a second-best rating of at least "triple B"2 in the Eurosystem's harmonised credit scale, at issuance and at all times subsequently. RMBSs, securities backed by loans to SMEs, and auto loan, leasing and consumer finance ABSs would be subject to a valuation haircut of 26%, while CMBSs would be subject to a valuation haircut of 32%.

The risk control framework with higher haircuts applicable to the newly eligible ABS aims at ensuring risk equalisation across asset classes and maintaining the risk profile of the Eurosystem.

The newly eligible ABSs must also satisfy additional requirements which will be specified in the legal act to be adopted Thursday, 28 June
2012. The measures will take effect as soon as the relevant legal act enters into force.      

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Fri, 06/22/2012 - 09:14 | 2550478 chanxmanx
chanxmanx's picture

quid pro quo?

Fri, 06/22/2012 - 09:20 | 2550496 slaughterer
slaughterer's picture

Whichever country wins the EuroCup gets an extra €500billion from the ECB if they post some jock straps as collateral. 

Fri, 06/22/2012 - 09:21 | 2550519 battle axe
battle axe's picture

Soon physical dog shit will be eligible for collateral....

Fri, 06/22/2012 - 09:33 | 2550582 Nothing To See Here
Nothing To See Here's picture

I'm putting my oldest boxer shorts on ebay under "AAA collateral", see what I can get.

Fri, 06/22/2012 - 10:27 | 2550850 Fukushima Sam
Fukushima Sam's picture

I have been stacking up the Spiderman towels ever since their value approached 300 euros.  But then I had a boating accident and now they have all been lost.  :(

Fri, 06/22/2012 - 11:28 | 2551203 0z
0z's picture

When are they going to get us the "Spiderman Wheelbarrows"  ??

Fri, 06/22/2012 - 11:48 | 2551312 old naughty
old naughty's picture

not to worry, Spanish banks still have some left...go make another deposit.

Fri, 06/22/2012 - 09:34 | 2550585 CURWAR2012
CURWAR2012's picture

Only if it is from a German Sheperd. No shit acceptable from chihuahuas, Westies, or Portugese waterdogs.

Fri, 06/22/2012 - 09:52 | 2550695 Stackers
Stackers's picture

I'm still trying to figure out how you put up an outstanding loan as collateral for an outstanding loan.......... its nonsense.

Fri, 06/22/2012 - 10:05 | 2550759 dannyboy
dannyboy's picture

Absolutely nobody could have seen this coming. Nobody.

http://www.zerohedge.com/news/encumbrance-101-or-why-europe-running-out-...

Fri, 06/22/2012 - 09:54 | 2550703 t_kAyk
t_kAyk's picture

I have a great dane.  If we are now pricing in dog shit then I am a gazillionaire. 

Fri, 06/22/2012 - 10:44 | 2550794 trilliontroll
trilliontroll's picture

"Only if it is from a German Sheperd."

 So etwa ?

http://farm6.staticflickr.com/5182/5665721400_76b911f61a.jpg

 

 

Fri, 06/22/2012 - 09:55 | 2550691 Alpo for Granny
Alpo for Granny's picture

I heard they are closing the dog shit window.

 

"Paper dog shit will be eligible for collateral.... "

Fri, 06/22/2012 - 09:56 | 2550713 Alpo for Granny
Alpo for Granny's picture

Fifi Fiat. 

 

Fri, 06/22/2012 - 09:53 | 2550700 LeBalance
LeBalance's picture

heck no there is an understood value to feces, these "objects" are illusions of value. aka paper dog shit.

Fri, 06/22/2012 - 11:19 | 2551154 Jack Sheet
Jack Sheet's picture

"physical" ...good one

Fri, 06/22/2012 - 09:24 | 2550535 resurger
resurger's picture

lol

Fri, 06/22/2012 - 09:28 | 2550558 GetZeeGold
GetZeeGold's picture

 

 

Clinton should be running Euroland........everyone knows you should....deny, deny, deny.

Fri, 06/22/2012 - 09:35 | 2550593 knukles
knukles's picture

What could go wrong?

Fri, 06/22/2012 - 09:31 | 2550573 Rikki-Tikki-Tavi
Rikki-Tikki-Tavi's picture

Would make sense, after all the players already posted will need some gear

 

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8671468/...

 

Team ECB should be Champions League material.

Fri, 06/22/2012 - 11:18 | 2551140 Jack Sheet
Jack Sheet's picture

Used ones of course

Fri, 06/22/2012 - 11:46 | 2551302 old naughty
old naughty's picture

while no doubt it would end up in this current state, I was amazed that they lasted this long...and if they still have jock straps (whatever) left, wish them luck using them.

Fri, 06/22/2012 - 12:43 | 2551554 skohiu
skohiu's picture

Germany vs. Greece today....Greece better throw the game or Merkel may Hank Paulson them.

Fri, 06/22/2012 - 09:36 | 2550596 williambanzai7
williambanzai7's picture

Auto loans are our speciality!

MARIO DRAG RACE VERSION 2

Fri, 06/22/2012 - 11:59 | 2551362 mt paul
mt paul's picture

squid pro quo...

Fri, 06/22/2012 - 09:15 | 2550481 Capitalist10
Capitalist10's picture

Used condom CDOs now AAA

Fri, 06/22/2012 - 09:17 | 2550497 Stoploss
Stoploss's picture

Ahh, so clothes and shoes still work after all...

Fri, 06/22/2012 - 09:20 | 2550514 Comay Mierda
Comay Mierda's picture

that's draghi's favorite

Fri, 06/22/2012 - 09:15 | 2550483 mrktwtch2
mrktwtch2's picture

they keep throwing things at the wall hoping something will stick..

Fri, 06/22/2012 - 09:38 | 2550603 knukles
knukles's picture

Reference above: used condoms

See, there are reasons to relax the rules.
Nothin'll go wrong.

Believe me.

Who the fuck is in charge of this shit? 
We've humorously giggled about Timmah and Summers for years, but this is beyond reality. 
Kafkesque Cenrtal Banking.

No way.
No fucking way.

Fri, 06/22/2012 - 09:43 | 2550627 BandGap
BandGap's picture

We will go through stages in order to accept this new reality. Honestly, I'm with you here, but nothing seems to point that going back to what was "normal" is even remotely possible now. Don't fight the current, see where it leads you.

Fri, 06/22/2012 - 09:15 | 2550486 doomandbloom
doomandbloom's picture

Easy Peasy!

Fri, 06/22/2012 - 09:16 | 2550490 CClarity
CClarity's picture

Will accept Olympic medals made of plastic.

Fri, 06/22/2012 - 09:19 | 2550505 SeverinSlade
SeverinSlade's picture

Olympic gold medals apparently have "Made in Greece/Italy/Spain/Portugal.  Property of Germany" stamped into the back.

 

Fri, 06/22/2012 - 09:24 | 2550533 fuu
fuu's picture

nice

Fri, 06/22/2012 - 09:19 | 2550492 Mercury
Mercury's picture

Layup for WB7:

Top Ten Things The ECB Is Considering Qualifying As Eligible Collateral.

Fri, 06/22/2012 - 09:17 | 2550493 EconSammie
EconSammie's picture

Yes I saw this whole concept come under some deserved fire earlier.

The Euro area

 

Many times during its crisis Euro area politicians and leaders have suggested that the Euro area should do its own ratings. The initial problem is that this would come with an enormous moral hazard issue. And of course if there was a group of people unfit for such a role I think that they have demonstrated that they are it!

 

This week the European Central Bank has been testing the waters in this area with one or two leaks to the media. Let me offer a clear problem with it doing this, the ECB still assumes that sovereign nations cannot default. Meanwhile in the real world Greece has had a debt haircut otherwise known as a default. Of course the ECB side-stepped this with its own holdings of Greek debt evidencing again the truth of George Orwell’s words.

 

ALL ANIMALS ARE EQUAL BUT SOME ANIMALS ARE MORE EQUAL THAN OTHERS

 

http://www.mindfulmoney.co.uk/wp/shaun-richards/why-bank-downgrades-by-ratings-agencies-may-mean-nothing-at-all-as-we-see-another-market-failure/

 

Fri, 06/22/2012 - 09:17 | 2550495 SeverinSlade
SeverinSlade's picture

Go long on lube.  Europe is going to need lots of it if it hopes to avoid severe chafing from this massive circle jerk.

Fri, 06/22/2012 - 09:18 | 2550501 SmoothCoolSmoke
SmoothCoolSmoke's picture

Euro - 30 pip pop.  MEH.  Dow futes look to open up 60-70.  That's a bit hard to understand.  But I do expect a ramp up in to the SCOTUS HC announcement.

 

Fri, 06/22/2012 - 09:20 | 2550502 Cognitive Dissonance
Cognitive Dissonance's picture

Will they hand out token tokens as valuable fiat when failure is finally obvious?

Tokens

Fri, 06/22/2012 - 09:34 | 2550590 Unprepared
Unprepared's picture

Would may monthly pass still do the trick?

Fri, 06/22/2012 - 09:42 | 2550621 HoofHearted
HoofHearted's picture

They already do. By definition a coin has to have intrinsic value. And by definition something that only has value ascribed to it from some external authority is called a token. Since all coins in current circulation are made from base metals, we all use tokens.

Fri, 06/22/2012 - 10:09 | 2550770 Cognitive Dissonance
Cognitive Dissonance's picture

But what about token tokens? Is a copy of a copy anymore real than the original copy?  :>)

Fri, 06/22/2012 - 10:19 | 2550800 Jethro
Jethro's picture

Token tokens?  This is getting dangerously close to "Pimp my Currency".  We'll have to hire Chairman Xzibit for this job.  "Yo dawg, we heard that you liked fiat!  So we put fiat in your fiat, and now you can have debt inside your debt!"

Fri, 06/22/2012 - 09:19 | 2550506 pods
pods's picture

To get out of a hole, the first thing you must do is stop digging and put down the shovel.

pods

Fri, 06/22/2012 - 09:24 | 2550534 Burr's 2nd Shot
Burr's 2nd Shot's picture

That's too "old" logic.  "New" logic says dig all the way through and come out the other side.

Fri, 06/22/2012 - 09:33 | 2550581 spentCartridge
spentCartridge's picture

Only an idiot would dig a hole with a shovel.

 

A real hole digger would use a spade.

Fri, 06/22/2012 - 09:47 | 2550656 GreatUncle
GreatUncle's picture

A real holde digger would say stuff you and your mates with spades and get out a JCB or CAT.

Now were are talking digging a hole and is good for shovelling sh%^ too.

Fri, 06/22/2012 - 09:51 | 2550687 catacl1sm
catacl1sm's picture

"Then why not use spoons instead of a shovel?" -Milton Friedman

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