1. Executive Summary – The Specific Rationale for Change

Given the current state of the European economy, the impact of the Euro zone crisis, pro-cyclical changes to banking regulation, the inability of many European banks to directly access the capital markets, collateral encumbrance constraints, and investor capacity constraints on bank debt, it is important that European policymakers recognise and take proactive steps, together with the industry, to help encourage investment in high quality securitisations. According to recent estimates, Eurozone banks have shrunk by € 3.3 trillion since May 2012 and it is estimated that they will cut around € 2.8 trillion more assets over the next 3-5 years. Corporate loans and are not expected to surpass their pre-crisis peak of € 4.8 trillion until 2015.

The purpose of this report is to: a) summarise as well as provide details on the specific economic benefits of high quality securitisation to the overall European economy, b) provide information which is beneficial to investors, c) provide relevant highlights on changes to banks and regulations, d) provide data on the state of the European securitisation market, including its strong credit and secondary price performance, and e) provide highlights of recent industry initiatives to identify industry best practices in securitisation, such as the Prime Collateralised Securities (“PCS”) initiative.

The specific rationale for increased investment in high quality European securitisations is highlighted below. Points 1-8 focus on funding issues, while the remainder focus on investor issues, financial stability, regulatory measures to date and industry initiatives. Supporting data is provided in the text which follows this Executive Summary.