9 Jun 2014

AFME High-quality securitisation for Europe: The market at a crossroads

Preface

The legislative cycle after the 2014 European elections should be focused on long-term growth. As the new European Commissioners and MEPs look forward to the next five years, they have a key task – to introduce legislation that promotes
sustainable economic growth in Europe, so reducing unemployment and debt through improving the structure of the pan- European economy.

Substantial progress has been made in establishing a framework of financial regulation that reduces the risk of the banking system endangering the economy again. As that framework moves from legislation to implementation, it is time to focus on addressing the growth agenda.

The European Commission acknowledges in its ‘roadmap to meet the long-term financing needs of the European economy’,that the funding model needs to be improved. Europe is too reliant on its banks for funding and needs to develop its capital markets in order to improve the availability and cost of finance. As the Commission says, if long-term growth is to be improved, then companies need better access to large and liquid capital markets.

This paper highlights the potential for high-quality securitisation in Europe to play a
part in unlocking jobs and growth. Yet for it to do so, the proposed regulatory framework needs to be sensibly calibrated – recognising risk, but also taking into account the strong performance of high-quality securitisation in Europe over the past few years.

We welcome the support of central banks and policymakers in calling for a revival of
high-quality securitisation, and stating that a revived and sustainable securitisation
market would contribute to lower cost of capital, higher economic growth and a broader distribution of risk.

In our view, there is an urgent need for coordinated action to revive securitisation. It would be a first step in helping Europe’s banks fund their customers more efficiently. It would broaden the range of tools available to help them manage and transfer
risk. And it would also help rebalance Europe’s financial system by widening and deepening its capital markets.


Simon Lewis
Chief Executive, Association for Financial Markets in Europe

1. Commission roadmap to meet the long-term financing needs of the European Economy, 27 March 2014