Banks have increasingly used asset-backed securities as collateral for funding from the European Central Bank, a situation that the bank is expected to crack down on soon. "Increasing speculation about diminishing central-bank support in illiquid, difficult-to-price asset-backed-security markets is likely to undermine investor-risk sentiment and raise the level of write-downs in the banking sector," said Lena Komileva, head of G7 market economics at Tullett Prebon.

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