The Full Reveal


Burdell said there will be a scoring system that will reflect whether the originator or other data provider on a transaction submitted comprehensive information, with the right kind of data in its corresponding field in accordance with the ECB eligibility criteria. The higher the score, the more complete the information. "This will be a quality assurance score," he added. "It will let investors know that a quality assurance process has been applied to the data."

As it currently stands, scores are combinations of A-D and 1-4, with A1 denoting full compliance and D4 slapped on a deal where a good number of the fields are noncompliant for any number of reasons, according to the ECB Web site. For purposes of the scoring system, the nine month grace period for completing the template is divvied into three phases of three months each.

Gonzalez said that the score will not determine the haircut that the ECB applies to a deal for collateralized funding, but he added that the Eurosystem reserves the right to change or modify its haircut schedule when it deems that doing so is necessary.

 

Mixed Get Nixed

Barred from ED - and by extension the repo window - is any transaction backed by pools of different kinds of assets. Heterogeneous ABS will remain eligible until March 31, 2014.

In an early July report, Bank of America Merrill Lynch said this policy shift will weigh on the Italian market, where mixed collateral is more common, particularly in lease ABS. "The use-by date of these deals from the Eurosystem collateral point of view is limited by the end of March 2014," said BofA Merrill analysts.

For deals that are eligible and entered into the warehouse, the data will still not be clean enough for immediate use by some investors, sources said.

"If investors don't use it directly, they'll use it indirectly," an investor familiar with the European DataWarehouse said. "You can imagine cottage industries developing around this - people offering services to analyze the data, process it, clean it up."

Ismail said that Lewtan - which was part of a group of companies that had lost the bid to Sapient to build the warehouse's software - is prepared to collect, scrub and normalize the data from the warehouse and put it into a format that people can use.

"If there's any experience we've learned over the years it's that people will conform to a particular template, but it still won't be normalized against issuers and services," Ismail said. "Someone has got to take the trouble to normalize it; otherwise it will be useless."

Burdell said that ED will "check the validity of data to make sure everything is in the right order according to the ECB templates, but it's not an auditor."

Basically, it is a matter of ensuring that the right information goes in the proper field.

"ED is not designed to do anything intelligent with the data," he added. "[But] as part of maintaining exceptional service, ED will have an external firm come in regularly to review and report on its operations, methods and processes against agreed and contracted minimum service levels."

The warehouse's impact has been assured by the ECB's active involvement, sources said. The bank will, after all, be one of its largest customers, given all the ABS it has already taken on as collateral for funding eurozone banks.

"Having a data warehouse like this, and the ECB using its position as one of its largest users, I think will have a very positive effect on the market in terms of standardizing loan-level requests, getting originators who might have been reluctant to provide this detail or to do the necessary investments to provide it," said Santander's Gandy.

The eurozone's monetary authority, however, will not own a piece of ED.

"The ECB itself will not be a shareholder, but it will be an active observer [as well as] a client. Our position is one of support and a catalyzer of change so as to equip the ABS market with the necessary tools to develop and reactivate itself," Gonzalez said.

 

Mitigating Impact

But the project may not have the impact it could have, given that, for now, a significant portion of the market is being kept alive by lenders in the Netherlands and the U.K. (See pie chart on the next page.) The former group is reticent to participate, while the latter is not as dependent on ECB funding as eurozone banks and therefore may not feel as compelled to participate.