The European Central Bank (ECB) and the Bank of England (BoE) set out proposals yesterday to resurrect the European Union's market for asset-backed securities (ABS) and help the flow of credit to smaller businesses.

Europe's ABS market has not recovered from the stigma created by the global financial crisis, which was triggered by doubts about the quality of assets in supposedly rock-solid US mortgage-backed securities.

The ECB and the BoE aim to get European banks and investors to agree common standards for safer ABS, which could help build a stronger economy by providing credit to firms that are too small to raise investment funds direct from capital markets.

"Securitisation can support greater funding diversification, free up capital to allow banks to extend new credit to the real economy, and provide ... insurance companies and pension funds with access to a broader pool of assets," the BoE said.

Last month the two banks said public intervention to kick-start the market was needed and accused global regulators of taking too tough a stance on the sector.-Reuters