Speaking as part of a panel discussion at Fitch Ratings’ Non-Conforming Residential Mortgage-Backed Securities conference, Rob Collins, chief financial officer at Advantage, remarked that while lenders were easily able to go to the ECB for funding, they were continuing to circumvent the money markets.
He claimed that as long as the ECB continued this, lenders would not raise capital in the money markets, thereby maintaining the current illiquidity.
A spokesperson for the Council of Mortgage Lenders, said: “Without funding from the ECB, some institutions wouldn’t be able to raise funding and central banks cannot absolve themselves from their responsibility to act where necessary to protect the market.”
However, the president of the ECB, Jean-Claude Trichet, was forced to deny claims recently that the central bank had been bailing out Spanish banks.
According to figures from the Bank of Spain, Spanish banks borrowed an extra €24 billion euros in Q4 2007, using mortgage-backed securities (MBS) as collateral.
However, the Financial Times remarked: "By accepting MBS in exchange for cash, the ECB may be delaying the repricing of risk that analysts believe is necessary for the orderly resumption of the market.”
