More support for securitisation reform from the ECB

Following the speech by Christine Lagarde last November calling for the revitalisation of the European securitisation market as a key priority for the European Union, the European Central Bank has now issued a statement by its Governing Council on advancing the Capital Markets' Union. As in the speech by Ms Lagarde, the statement places the growth of a securitisation market at the center of its recommendations. Together with consolidated European supervision, the harmonisation of insolvency, accounting and securities laws, the improvement of post-trading regimes and the amelioration of the fiscal disadvantage faced by equity investments, securitisation is one of the […]

Lagarde calls for a strong securitisation market as an essential component of a historically necessary change to Europe's finance architecture

It is not everyday that a public official calls upon the legacy of the great philosopher Immanuel Kant, but Christine Lagarde did just that today in a short but impactful speech on the historical necessity of the creation of a strong European capital market's union. A more than notable passage in the speech reads: "A genuine CMU would mean building a sufficiently large securitisation market, allowing banks to transfer some risk to investors, release capital and unlock additional lending." Not only is this very high profile support for a strong securitisation market positive, but it should be noted that it […]

Green securitisation - ECB adds its voice in support of the "green proceeds" approach

The European Central Bank has just published its opinion on the draft EU Green Bond Standard legislation. Overall an excellent piece, it is notable when it comes to securitisation for its support for a definition of green that encompasses issuance where the proceeds are used by the originator to finance sustainable projects. This can be found in article 3.1.5 of their opinion. As our readers will recall, a debate arose as to whether the legal EU definition of sustainable securitisation should be limited solely to securitisations of green assets (eg mortgages of green housing or auto loans for electric vehicles) […]

Bank of England and ECB respond to the EU Consultation on securitisation

The Bank of England and the ECB released a joint-response to the European Commission Consultation on securitisation. In their response they appear curiously to favour issuer self-certification of quality. This approach, which is not that of the PCS, is quite a bold one in the light of the events that precipitated the financial crisis. It remains to be seen whether it is one that commends itself to policy makers and investors who suffered the consequences of the sales by issuers of purportedly high quality securitisations that then suffered such dramatic losses.

ECB announces details of ABS PP

The details of the ECB's ABS purchase program have been published. Save for some adaptations for Greek and Cypriot ABS, the eligibility criteria remain those of the Eurosystem collateral rules. The program also envisages the purchase of a very substantial portion of any deal - up to 70%. With such a large portion being purchased it seems that the ECB could be the determinant factor of future pricing.

Mario Draghi gives more details on the ABSPP at European Parliament

In his Monday speech to the Economic and Monetary Affairs Committee of the European Parliament, Mario Draghi gave more details on the ECB’s asset backed securities purchase program (ABSPP). It appears that the ECB will be purchasing senior notes of securitisations that are eligible as collateral under the existing Eurosystem scheme. It is unclear though whether the eligibility criteria will be merely the same as under the existing system or whether, as PCS has advocated, they will be higher thus reflecting the greater risk taken by the ECB as final purchaser. PCS very much sees this program as an opportunity […]

ECB announces an ABS purchase program – but details to follow

Today, Mario Draghi announced the long-awaited ECB ABS purchase program. The President of the ECB said that the Eurosystem would purchase a broad portfolio of simple and transparent asset-backed securities with underlying assets consisting of claims against the euro area non-financial private sector. The detailed modalities of this purchase program (together with those of a new covered bond purchase program) will be announced on or soon after October 2nd 2014. PCS warmly welcomes this confirmation of the strength and quality of high quality securitisations and the acknowledgement of the importance of this financing channel for the European economy. Much, of […]

A few hours ago, the Bank of England and ECB released the recently announced report on securitisation entitled: "The case for a better functioning securitisation market in the European Union". PCS is reading the document and will be providing comments as soon as we have digested the contents. The report may be found here.

Senior IMF official supports the ECB/BoE approach to high quality securitisation

In the first sign that, following the ECB/Bank of England paper, the debate over the regulatory treatment of high quality securitisation is obtaining a foothold on the global agenda, Jose Viñals, a senior IMF official, spoke favourably of the approach championed in the joint communication. His comments were made in an interview with Borsen Zeitung and picked up by Reuters. (The Reuters piece may be found here and the original interview in German may be reached through here - but is behind a pay wall).

Joint ECB-Bank of England paper on securitisation is published

Today, the Bank of England and the ECB published the recently announced joint paper on securitisation. The paper supports strongly the value of high quality securitisation. Acknowledging the many macro-economic reasons for the low level of current European issuance, the paper also identifies the need to incorporate in the proposed regulatory schemes a single definition of high quality securitisations and to calibrate the prudential rules based on the actual performance of such securitisations. Reflecting arguments that PCS has been putting forward since its inception, we strongly welcome this short but focused and to the point contribution. What makes this paper all […]

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