ECB and ABS

The ABS volume in Europe has been declining since the financial crisis. The market has shrunk even in the last three years while US ABS issuance has actually increased with the market over double the levels of 2010. There is a simple question of whether there is enough ABS for the ECB to buy and have a meaningful impact on their balance sheet and thus the economy of the Eurozone. There is also the problem of who will hold the subordinated debt or equity tranche of ABS issuance. If the subordinated debt is not sold, there will not be strong ABS issuance. 

An  ECB program of QE should start to buy sovereigns if the intent is to really increase the balance sheet of the central bank, but this becomes a very technical problem of legality and mandate. The ECB ABS purchase program was a nice announcement, but the technical details make this more difficult to implement in a size that is meaningful.