The Full Reveal


For instance, there have been reports that Dutch banks/issuers are staying out of the warehouse because of how ED was set up and the charging of fees. The truth is more nuanced, though this area of the market - and not a negligible one in the past year or so - is not exactly embracing the warehouse either.

"Dutch issuers at this point in time don't want to participate in funding the warehouse, but they haven't said that they wouldn't upload their data to the warehouse," said Ferdinand Veenman, a partner at the corporate finance group at KPMG and advisor to the soon-to-be-launched Dutch Securitisation Association.

In a joint statement on the matter, 10 Dutch issuers of ABS - among them ABN AMRO, ING and Rabobank - as well as the Holland Financial Centre said they sent a letter to the ECB conveying that they "fully subscribe to the objectives of the European Central Bank of restoring confidence and facilitating investment in the structured finance markets across Europe and that they agree that requiring loan-level data being made available to investors will contribute to meeting these objectives."

But, at the same time, the signatories were still discussing their participation in the warehouse with the ECB. "The Dutch issuers have raised their concerns regarding the information that was provided in respect of the funding, functioning and objectives of the European DataWarehouse," they said.

Veenman said that Dutch originators - which are overwhelmingly RMBS issuers - have come together to come up with a single standard for mortgage-backeds. The goal is to have investor reports issued on a monthly basis for RMBS and to have the same table of contents and main definitions in the prospectuses and transaction documents. Veenman said that Dutch banks should be compliant on this front potentially by the end of October.

The Dutch are also launching a Web site with this information, stats on the Dutch housing and mortgage markets and possibly more. "It is currently being investigated whether loan-level data can be made available to investors (including the ECB) through the portal as well," according to the statement signed by the Dutch ABS participants.

The ECB, on the other hand, is trying to steer the Dutch toward ED.

"We'd like to see the Dutch participate - this is a shared message from the Dutch Central Bank, the European Central Bank and all members of the governing council," Gonzalez said.

If they stay aloof, as it now stands the Dutch will lose the ability to repo their transactions with the Central Bank at some point. Sources believe some kind of rapprochement is the most likely scenario.

 

U.K. Reigns over Issuance

For the Brits, however, there is a different dynamic at play. Originators there can rely on the Bank of England's new Funding for Lending Scheme, which if successful would presumably reduce any reliance they might have had on ECB funding. U.K. issuers have also been more successful of late in placing their deals with market investors, notably U.S. buyers hungry for the kind of yields that are a rare thing at home.

This does not mean that the Brits have not or will not use the ECB's repo facility. Many of the largest among them have been issuing euro tranches and, with their branches in the continent, fulfill all the criteria for ECB funding, said a source at a British originator.

The eurozone mess and regulatory uncertainty are at the root of inactivity in the rest of the region. Proponents of ED say that the warehouse will not fix everything but that it should help bring investors back to these more embattled segments of the market.

"The warehouse will work not just because [ECB] funding is critical for a very significant number of banks in the moment, but also because investors have also told us they now want a central and independent point to access their data," Gonzalez said. "That being said, this is a crisis that is not going to disappear in the next few years, and therefore it's doubly important that the warehouse gets up and running and loan-level information starts flowing to the market as soon as possible."

But BofA Merrill analysts said in a report that ED could inadvertently bump up the costs of doing RMBS vis-à-vis covered bonds, given that the former now have even more extensive disclosure requirements.

"We suspect that this will be one more nail in the coffin of peripheral RMBS," the analysts said. "Yet peripheral countries need SME and consumer ABS as a way to access liquidity through ECB, hence the need to comply with loan-by-loan disclosure requirements."

Ironically, the analysts see U.K. and Dutch issuers as the best equipped to comply.

At any rate, the Bank of England already makes loan-level data mandatory for receiving collateralized funding and uses templates modeled after the ECB's. Lewtan runs a Web site called the Global ABS Portal that collects the loan-level data in the U.K. and makes it available to anyone.

Burdell said that ED would certainly like to see everyone who's eligible to participate. "We're trying to get as many people as possible to participate in our workshops, webinars and even through the press so hopefully no one's surprised come December," he added.

Whatever the actual percentage of the European marketplace that decides to use ED, the warehouse inarguably represents a leap forward in the region's efforts to put collateral under the microscope. This will create an unprecedented opportunity to compare deals across the countries and collateral.

"It'll be a standardized pan-European database, and as a result it will allow us to build standardized pan-European models," said the investor. "So we'll be able to compare a Spanish deal to a Dutch deal and what is truly cheap and what's dear."