Following a plethora of voices supporting the revival of European securitisation, last week saw another addition to the chorus. It came in the form of the publication of the report by a committee set up by the French Treasury and headed by Christian Noyer. The report entitled "Developing European Capital Markets to Finance the Future" (which can also be read in the original French) makes for interesting reading indeed, especially in its opening analysis of the reasons why many European policy makers are deeply concerned about the consequences of an underpowered European capital market. To its credit, the report also avoids being a near endless list of every aspect of capital markets that can benefit from improvement. There are only four key proposals: the creation of a long-term pan-European savings product, integrated supervision, the reduction of post-trade fragmentation and, the focus of our interest, the revival of the European securitisation market.
To effect such revival, the report rightly focuses of the need to update the regulatory framework to make it reflect the reality of risk and liquidity in securitisation products. Also interesting is the suggestion of some form of pan-European platform, modelled (maybe loosely, maybe closely) on the US Fanny Mae or the Japanese JHF. The aim of such a platform would primarily be the generation of a high quality safe asset with high liquidity generated by volume and standardisation. In other words, such a platform is not seemingly designed to either revive or replace the European private securitisation market but to work along side it. We suspect that this idea will be a major focus of discussion in the months to come.
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