PCS publishes new paper: “The illusory promise of self-attestation”

In the recent publication of the joint Bank of England and ECB response to the European Commission’s consultation on securitisation, the proposal was made to anchor the new regulatory framework on self-attestation by the issuers.  This led us to reflect on the difficulties of such an approach and to conclude that it would prevent any meaningful market renewal.  We felt that the issues around how to “operationalise” the new framework were crucial to prevent a theoretically sound approach from being negated by self-defeating functional requirements.  To assist in framing this debate, we decided to publish the PCS views on self-certification of simple, transparent and standardised securitisations: “the illusory promise of self-attestation”.  In our estimation, despite a superficial attractiveness, this is a framework that in actuality imposes all the risk on investors.  It also would not generate the “common currency of understanding” necessary to produce the liquid secondary market.  With the hopes of renewed financial flows to parts of the real economy depending on new investors coming to the European securitisation market, such a framework is most likely to be an insuperable obstacle.  PCS’ conversations with members of the investor community appear to confirm this view.