Specially created securities used for refinancing purposes that are backed by a pool of similar assets (e.g. mortgage loans granted, leasing receivables, credit card receivables or also by a life insurance portfolio; collectively usually referred to as receivables portfolio, assets). – The debt service of the issued securities is borne by the pool’s income. If the underlying risks are broadly diversified, the overall risk associated with these securities is lower than that of the receivables originally securitized. – ABS transactions transfer loans from the balance sheets of banks (originators) entirely to investors in the course of a true sale securitization. This also transfers the risks to the ABS creditors and frees up credit lines at the banks. The instrument of the ABS is therefore also important in the risk management of the banks, but on the other hand it is being watched with Argus eyes by the supervisory authorities. – In their basic form, ABSs provide for the sale of the asset „portfolio of receivables“ to a company set up specifically for this purpose. The task of this special-purpose entity is exclusively to purchase the receivables portfolio and to refinance it by issuing securities secured by the receivables portfolio as an asset. – In principle, ABSs are eligible as central bank assets. However, in December 2010, the ECB decided to introduce information requirements for ABS at individual credit level, initially for securities backed by receivables from residential mortgage loans (retail mortgage-backed securities) and then gradually for all ABS. In September 2013, for example, a reporting requirement was introduced for individual loan data of ABS backed by credit card claims. Further requirements for ABSs as collateral for operations with the Eurosystem were announced by the ECB in 2014 and can be found on the relevant ECB websites. – ABS have been demonized as toxic assets and blamed for the subprime crisis. However, it is easy to see that it was not ABS as such that triggered the subprime crisis, but their misuse. – See ABS funds, assets, illiquid, arranger, auto loan, securitized, back-to-originator postulate, collateralized debt obligations, conduit, single originator securitization, embedded value securitization, end investor, first loss tranche, loan extension, loan securitization, private label asset-backed securities, residential mortgage-backed securities, single master
Liquidity conduit, debt coverage ratio, debt security, covered, subprime crisis, true sale securitization, securitization paper retention, housing loans, securitized, backing, corporate loans, securitized, securitization structure, interest rate freeze, special purpose vehicle. – Cf. Deutsche Bundesbank Monthly Report of April 2001, p. 20 f., Deutsche Bundesbank Monthly Report of April 2004, p. 27 ff, BaFin’s 2003 Annual Report, p. 22, p. 126, BaFin’s 2007 Annual Report, p. 80 (asset-backed securities are included in the new investment regulation) and the respective BaFin Annual Report, ECB Monthly Report of February 2008, p. 91 (ABSs hardly compete with covered bonds; further advantages for originators and investors), ECB Monthly Report of February 2008, p. 102 (central bank eligibility of ABSs), BaFin Annual Report 2008, p. 46 (IOSCO advises on transparency rules to be adopted for ABS trading), ECB Monthly Report of November 2011, p. 88 et seq. (ABSs in the refinancing structure of banks; overviews), ECB Monthly Report of September 2013, p. 53 et seq. (Resurgence of the ABS market after the financial crisis; supervisory and legislative measures,; overviews), Deutsche Bundesbank Monthly Report of April 2014, p. 61 (Use of ABSs as eligible collateral).

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
E-mail address: info@ekrah.com
https://de.wikipedia.org/wiki/Gerhard_Ernst_Merk
https://www.jung-stilling-gesellschaft.de/merk/
https://www.gerhardmerk.de/

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