European Central Bank hires BlackRock for advice

from fiercefinanceit.com




August 28, 2014 | By Renee Caruthers

The European Central Bank (ECB) has hired BlackRock Solutions to help design and implement a potential asset-backed securities (ABS) purchasing program. The final decisions on the design of an ABS purchasing plan will be made by the ECB's governing council and the ECB will be responsible for carrying the plan out.

BlackRock Solutions is the advisory arm of BlackRock, the U.S. asset manager. The value of the contract was not disclosed and safeguards against conflicts of interest were built into the agreement, according to an ECB spokesman.

The ABS purchasing plan would be aimed at easing credit conditions in Europe. ECB president Mario Draghi said last week that the bank was "fast moving forward" with preparations to buy the securities, according to an article from theFinancial Times. He feels that the central banks' purchase of ABS would create more demand for securitizations and might encourage lending to credit-starved businesses.

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Just one day before the announcement of the contract with BlackRock, Draghi warned about low inflation in Europe while speaking at Jackson Hole, and he said the ECB would have to use "all available instruments" to stave off the threat of deflation, according to an article from Bloomberg.

London banker Dipesh Mehta, director of securitization research at Barclays, viewed the contract as a positive, during an interview with Bloomberg, but had questions about the ECB's potential move toward quantitative easing that the purchases would signal.

"Hiring an adviser who knows the ABS market and has experience investing in it before, during and after the crisis is clearly positive," Mehta said. "However the appointment in itself is simply another step on the path toward QE. It is the format of QE that is key, with many questions to be answered on what bonds to buy and how to do it without jeopardizing the existing investor base."

Brian Beades, a spokesman for BlackRock, declined to comment on the contract with Bloomberg. BlackRock Solutions has held similar advisory roles for other central banks in Europe since the financial crisis. It has consulted to both the Bank of Greece and the Bank of Ireland.

For more:
- read the Financial Times article
- read an article from Bloomberg on Draghi's remarks and another on the BlackRock deal
- read the Reuters article

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