A note on STS securitisation signed by 32 associations and market participants sets out aspects of the Commission’s simple, transparent and standardised securitisation proposals that would need modifications if the project is to revive the European securitisation market.
The joint-note on STS securitisation, together with a similar joint position paper published by AFME/EFAMA/ICMA and Insurance Europe, shows the very strong, and unusual, degree of consensus amongst stakeholders over the additional steps necessary to allow securitisation to help fund the European economy. The signatories of the note – and the earlier joint position paper – represent issuers and investors, large and small participants, financial and non-financial economic actors and representatives of many geographies. In effect, they represent a cross section of all interested parties with experience in this finance channel.
The note sets out ten elements of the current European Commission proposal that need to be modified in order to create a market that has the four necessary characteristics for success: that the regulatory framework be stable, holistic, clear and executable. All ten elements are set out against these four requirements in a helpful appendix.
With public issuance of securitisation, according to S&P figures, down from €500 bn in 2006 to €75 bn in 2015 – and this notwithstanding the extremely robust performance of these bonds during the crisis – the market is at risk of stalling entirely. Should this happen, the capacity of a safe securitisation market to help return the European financial system to a more normal and stable basis could be delayed by a number of years. This explains the sense of urgency behind the desire of stakeholders to see a new and appropriate regulatory regime come into being.
PCS was honoured to be a signatory of the joint-note and fully endorses its content.