In response to the European Commission’s report on the review of the Securitisation Regulation*, Shaun Baddeley, Managing Director of Securitisation at the Association for Financial Markets in Europe (AFME), said:
“The Commission has published its much-awaited report on the functioning of the Securitisation Regulation. AFME agrees with the industry survey, conducted by the Commission, which finds that the Securitisation Regulation has not been successful in improving access to credit for the real economy. AFME accepts the Commission’s conclusion that more time is needed to truly assess the impact of the new framework but urges more action as soon as possible to help boost the securitisation market in Europe, which has been struggling for years due to regulatory imbalances.
“In particular, AFME welcomes the Commission’s invitation to ESMA to conduct a much-needed review of transaction reporting templates, noting the need to significantly simplify requirements for private transactions to make the framework relevant and proportionate. However, without change in the definition of a private securitisation, many private transactions will be treated as public for disclosure purposes, in part, defeating the purpose of the review. This will at best create real challenges for smaller borrowers reliant on bank relationships to finance themselves efficiently via private securitisation, and at worse, prevent them from accessing this funding at all.
“AFME also finds the opportunity to foster EU investor growth has so far been missed. While the report acknowledges market participants' concerns that investor due diligence obligations are disproportionate, creating high barriers to entry for new investors, there is no action to address this issue. The industry awaits with interest the recommendations from the Joint ESAs report on their review of the prudential capital framework for banks and insurers, which will present another important opportunity to attract investors back to securitisation. It will also be a chance to recalibrate bank capital to address disproportionate capital treatment for both parties, when compared to other asset classes.
“The report recognises the important contribution that securitisation can make in channelling capital towards the green economic transition and supports the EBA’s assessment that no separate sustainable securitisation framework is needed. AFME agrees with this assessment but would urge policy makers to recognise in the Green Bond Standard the important role that securitisation can play via green synthetic securitisation.”
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