European Central Bank

European Central Bank officials are moving closer to forcing banks to provide more information about the collateral they give the ECB in return for loans.

ECB policy makers may today approve the start of a consultation process with banks, investors and market participants asking them to suggest how residential mortgage- backed securities can be made more transparent, according to two people involved in the process. The Governing Council meets today in Frankfurt.

The ECB is trying to better monitor the quality of the assets it’s holding in return for the funds it’s pumped into the European banking system during the crisis. European banks have created about 1.1 trillion euros ($1.6 trillion) of asset-backed securities since June 2007, which they can use as collateral for ECB loans.

The ECB’s push “will increase transparency for investors and better information will attract new investors,” said Dipesh Mehta, a London-based securitization analyst at Barclays Capital. “U.S. investors already find the European transactions hard to look at without loan by loan data.”

Banks, investors and other market participants have about two months to comment, the people said. An ECB spokeswoman declined to comment.

ECB Vice President Lucas Papademos said on Dec. 12 the bank plans to take steps to help revive the asset-backed bond market which was dormant for more than a year until September, when Volkswagen AG and Lloyds Banking Group Plc sold investors 1.7 billion euros ($2.5 billion) of the securities.