FRANKFURT, April 24 (Reuters) - The European Central Bank is to demand more information from banks on hard-to-value asset-backed securities used as collateral for its loans, a report on Friday said.
Quoting people it said were familiar with the matter, news agency Bloomberg said financial companies will have to provide details of each underlying mortgage or loan they package into the debt, such as the value of the property backing a mortgage, how the property was assessed and whether the borrower is in arrears.
The ECB declined to comment.
The report said the banks would have to provide the extra information to rating agencies such as Standard & Poor's, Moody's and Fitch whose job it is to value the assets. It added the rule changes may be finalised by the end of the year.
The complexity of asset-backed securities and their valuation has been at the root of the financial crisis.
Investors have lost billions as prices of the assets, such as subprime property loans, have slumped and the problems have created knock-on effects which have savaged the global financial system and sent many major economies into recession.
Structured debt analysts say a move to provide better information is a necessary and logical step. The ECB has already twice tightened its rules surrounding ABS since the financial crisis flared last October.
The ECB annual report published this week showed that commercial banks more than doubled the amount of complex asset-backed securities they exchanged for ECB loans in 2008.
Last month it also warned that the euro zone's central banks would have to set aside 5.7 billion euros ($7.51 billion) to cover potential losses on asset-backed securities following the collapse of Lehman Brothers and a number of Icelandic banks.
(For ECB press release please click http://www.ecb.int/press/pr/date/2009/html/pr090305_2.en.html)
(Reporting by Marc Jones; editing by Stephen Nisbet)