ECB cuts Deutsche, State Street from ABS purchase program

By Francesco Canepa and Kathrin Jones

FRANKFURT (Reuters) - The European Central Bank has cut Deutsche Bank's wealth management arm and State Street Global Advisors from the roster of banks that buy asset-backed securities on its behalf, sources said.

The ECB is delegating more such purchases to national central banks as it attempts to exert more control over a part of its 1-trillion-euros-plus quantitative easing program that has yet to give the hoped-for boost to a sluggish European credit market.

State Street said in a statement on Wednesday its one-year contract with the ECB had ended. A source familiar with the situation said Deutsche Asset & Wealth Management's contract had not been renewed.

The ABS market, in which debt such as mortgages or car loans is sliced and diced into packages that are sold on to third-party investors, slumped after such instruments were blamed for triggering the 2007-09 financial crisis, leading to higher capital charges for insurers and banks that hold them.

The ECB has been buying on average 1.2 billion euros of ABS every month since November 2014, a small part of its 60-billion-euros a month QE program aimed at reviving lending and inflation in the euro zone.

It initially outsourced most of the buying to external asset managers but plans to gradually delegate it to national central banks once they have built up the capacity to handle the work.

The ECB said the Bank of France, already buying ABS in its domestic market, would now be able to carry out purchases in Finland too. The Central Bank of Belgium would also start buying ABS.

The ECB said it extended ABS contracts with Amundi and NN Investment Partners, part-owned by Dutch group ING.

Despite the ECB's efforts, ABS issuance has yet to pick up.

Around 80 billion euros worth of ABS was placed last year - a market that, at its peak, saw volumes of 1.1 trillion euros in 2008, according to research group Bruegel.

(Editing by Hugh Lawson and John Stonestreet)

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