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ECB appoints BlackRock to advise on possible ABS purchase programme

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  • European Central Bank

The European Central Bank (ECB) has selected BlackRock to advise its internal team on the creation of an asset-backed securities (ABS) initiative aimed at easing the flow of credit within the euro-zone.

The contract will see BlackRock Solutions, the advisory arm of the world’s largest asset manager, provide consultancy services after the bank’s governing council expressed interest in the creation of an ABS purchase programme.

The euro-zone’s central bank has been working to stave off the currency union from deflation in recent months, slashing deposit rates into negative territory.

At the end of July, Eurostat, the EU’s statistics office, said euro-zone inflation had fallen to 0.4%, well below the ECB’s stated aim.

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Any ABS purchase initiative is likely to ease credit markets in the area and intensify the supply of money, which should fuel inflation, in a similar vein to the quantitative easing seen in the US and the UK.

BlackRock Solutions will now work with the ECB’s internal team to help design a system and its implementation, before internal presentations are made to the bank’s executive board and proposals to the governing council.

The council will then decide whether to move forward with the programme based on the implications highlighted by internal analysis and BlackRock’s consultancy.

No time-line has been agreed.

However, it is understood the ECB is keen to make a decision on whether to move forward with such a programme.

A spokesman for the bank stressed that all decisions related to the potential ABS purchase programme would be made in-house.

“All decisions related to the design and implementation of a potential ABS purchase programme will be taken by the ECB decision-making bodies, while the execution of the programme would remain the responsibility of the ECB,” he said.

BlackRock confirmed its appointment but declined to provide any additional information.

It is understood BlackRock has provided similar services to the central banks of euro-zone countries Ireland and Greece, both of which accepted EU and International Monetary Fund bailouts at the height of the euro-zone crisis.

If successful, the system could help alleviate the threat of deflation, as the central bank runs out of room to manoeuvre using interest rates alone, having recently cut rates by 10 basis points to 0.15%.

Pension funds and investors across Europe lamented the decision, with Switzerland’s Publica describing it as a tax and the German association of company pension funds suggesting it was “expropriation”.

French bank BNP Paribas, meanwhile, said in January that it expected the ECB to launch its own quantitative easing programme by the third quarter of 2014.

Readers' comments (1)

  • Saw an interesting comment on this somewhere(apologies, but can't recall where) to the effect that the world's largest public sector hedge fund was now hiring the world's largest private sector hedge fund to fix things.

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