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 is the only actual concrete element given by the president of the ECB of what is required to create this shift in European finance. (Although, to be fair, there are also suggestions of a real European SEC and fewer players on the infrastructure side of capital markets). The point here is that securitisation is not relegated in the speech to one item on a long laundry list of "nice-to-have" changes that could help along the CMU. It is cited the necessary station on the way to a European capital market.
Another notable element of the ECB's support for securitisation is how Lagarde sees securitisation primarily as a capital management rather than funding tool on the banking side of the ledger.
This support for building a strong securitisation market as a necessary and key political task of the next five years is not a lone effort. It reflects a growing and vocal body of interventions by serious players (such as the French and German ministers of finance) going in the exact same direction. It also reflects many private conversations taking place within policy making circles. After a disappointing lack of meaningful movement on necessary regulatory changes in the last few years, PCS is hoping this will be the starting gun for the finalisation of the reforms that began over a decade ago.
This shows growing and open support for a proposition many (including PCS) have been putting forward for a number of years now: a strong capital market is essential if Europe is to prosper and a strong securitisation market is the only realistic way to achieve one. Since Christine Lagarde commendably gave us permission to use his name: "Securitisation for Europe is a categorical imperative ...at least politically".
We strongly encourage everyone to read the (short) speech.