The European Commission released its report on the review of the Securitisation Regulation on Monday. This was mandated by the Securitisation Regulation itself as part of a normal review process often found in European legislation. There was little to cause surprise to anyone who had been listening to the clear messaging coming from Brussels. The headline was that the Regulation having come into force in 2019 the Commission felt it was too early to tell whether it was working and so no meaningful changes were being proposed. Suggestions of changes to the disclosure rules were welcome, the rejection of a change in the definition of private transactions less so.
But the key point is that the real battlefield that will determine the success or failure of the European market does not lie with a serious root and branch reform of the Securitisation Regulation. It lies with the necessary changes to the prudential rules, specifically the capital requirements under the CRR and Solvency II for insurance companies and the rules on the Liquidity Coverage Ratio. Those were explicitly not in scope of this review but are subject to a now overdue response to a call for advice by the Commission to the Joint Committee of the ESAs. In addition, rule changes to disclosure, especially for private transactions could be impactful. Those battles still lie in our future.
PCS and many market participants though reject the notion that the rules are too recent to be changed and would be loath to see this argument trotted out to justify inaction on the prudential front where incontrovertible cases for change can be made.
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