The eurozone mortgage-backed bond market and the banks which rely on it are braced for some potentially harsh medicine following increasing hints from governors of the European Central Bank about some form of crackdown on banks' use of its liquidity facilities.

The use of mortgage-backed debt and other asset-backed securities (ABS) as collateral for central bank funding in Europe has increased significantly since the credit crunch. Strong signs that the ECB is now about to take action over this have the potential to unsettle not just securitisation markets, but other areas too.