Commission’s Call for Evidence on Securitisation – progress…but ever so slow

In the securitisation consultation  which closed last month, the Commission wrote that it would issue a call for evidence to the Joint Committee of the ESAs on the key unfinished parts of the STS reform – namely capital calibrations and LCR treatment.

True to its word, the Commission has now issued this call for evidence (found here).

The good news is that it seems to cover all the items needing to be covered including the capital calibrations for both bank and insurance investors and the treatment of securitisations for the liquidity coverage ratio.  It also name checks the excellent report from the High Level Forum on Capital Markets’ Union containing most (if not all) the recommendations that we, at PCS, and many market participants have called for.

The bad news is that the ESAs (ie the EBA, EIOPA and ESMA) do not have to report before September 2022.  This means that the very earliest we could expect these reforms to be introduced is at the end of next year.  When one considers the continued decline of the STS securitisation market, the need to revitalise this market to assist banks faced with capital constraints and the financing of Europe’s green transition, this extended timetable is unfortunate to say the least.  We should not lose sight of the fact that the High Level Forum’s recommendations were issued in June 2020.

PCS would therefore implore the European Union, at the very least, to keep to this most elongated timetable and not to allow it to slip further if it wants to have any securitisation market to revive.