5
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Cross-cutting issues
47
Table 7: Assets of euro area financial vehicle institutions by type, 2010Q1-Q2011Q4 (€bn)
Year
Quarter
Total
Deposits
and loan
claims
Securitised loans
Securities
other than
shares
Other
securitised
assets
Shares
and
other
equity
Other
assets
Total
Originated in the euro area
Originated
outside
euro area
MFIs
Other financial
intermediaries,
insurance
institutions and
pension funds
Non-
financial
institutio
ns
General
governme
nt
Remaining on
the MFI
balance
sheet
2010
Q1
2290.8
358.3
1440.7
1135.4
559.3
137.6
25.0
7.3
135.4
280.4
99.3
43.5
68.6
Q2
2285.6
363.1
1437.2
1131.6
570.6
140.5
24.7
6.4
133.8
278.7
101.3
41.1
64.2
Q3
2287.2
350.3
1469.72
11761.2
582.4
148.7
23.5
6.3
130.0
259.0
100.3
41.4
66.4
Q4
2353.0
373.8
1525.8
1226.2
606.4
140.5
22.4
6.0
130.8
250.5
92.5
41.9
68.6
2011
Q1
2255.3
351.5
1484.5
1185.1
595.3
142.5
21.8
5.9
129.2
241.6
89.0
36.3
52.4
Q2
2216.4
340.1
1461.2
1167.0
585.3
144.7
20.4
5.2
123.9
232.5
88.6
35.7
58.3
Q3
2201.1
321.7
1465.6
1180.7
590.5
142.8
20.5
5.1
116.3
232.5
86.9
37.8
57.6
Q4
2269.5
324.6
1530.3
1244.7
583.1
147.8
20.8
4.8
112.0
228.9
90.0
36.8
58.8
Note: Outstanding amounts
at end of period
Transactions during period
Source: ECB Monthly Bulletin March 2012
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Cross-cutting issues
48
The ECB data also provides information on the holders of securitised loans originated by euro area
MFIs. At the end of 2011, households held the bulk of such loans (67%) followed by non-financial
corporations (21%). Interestingly, the non-banking financial sector in total holds only 1.5% of such
loans.
Figure 23: Holdings of securitised loans originated by euro area MFIs in 2010Q1 to 2011Q4 –
per cent of total holdings
Source: London Economics analysis of data in table 2.10 of statistics published by the ECB in its Monthly Bulletin
5.1.5
Conclusions
In order to monitor developments in asset-backed securities and commercial paper, the data from
AFME provides a good picture of the European market, albeit with a lag,
while the ECB data
provides more detailed information for the euro area, especially with regards to holdings of
securitised loans.
Both data sets provide information on the volume of asset-based securities that remain on the
books of the originating MFIs. While this could, in theory, provide useful information on the state
of the underlying market for securitisation and risk appetite by non-MFIs, at the
present time the
figures are mainly driven by the MFIs’ desire to produce collateral acceptable to the various
liquidity programs undertaken by central banks.
5.2
Repos
5.2.1
Background
For an economic perspective, repurchase agreements (repos) are very similar to security lending. A
repurchase agreement is the sale of a security coupled with an agreement to repurchase the
security, at a specified price, at a later date. In both cases, title to a
security is temporarily
transferred to a third party (see Adrian et al. (2010) and Ruchin (2011) for further details on the
functioning of the repo market).
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2010 Q1
2010 Q2
2010 Q3
2010 Q4
2011 Q1
2011 Q2
2011 Q3
2011 Q4
Households
Non-financial corporations
Other financial intermediaries
Insurance corporations and pension funds
General government
Non-euro
borrowing sector
Unallocated
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Cross-cutting issues
49
However, they differ in the sense that repos have a fixed term. In contrast to securities lending
where the transaction is typically driven by a borrower seeking temporary ownership of a security,
repos are often driven by a lender seeking to obtain liquidity.
More recently, a particular form of repos and securities lending has emerged, namely collateral
upgrade transactions whereby the two parties to the transaction exchange
assets of substantially
different quality. The borrower receives the higher quality assets and, in return for which, posts
collateral while the lender provides the higher quality assets and, in return, receives poorer quality
collateral (FSA, 2012). A particular form of such transactions are liquidity swaps “
which effect a
liquidity transformation between an insurer (counterparty long liquidity) and a bank (counterparty
short liquidity) by typically exchanging high-credit quality, liquid assets such as gilts held by the
former with illiquid or less liquid assets, such as asset-backed securities (ABS) held by the latter
”
(FSA, 2011).
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