The EACB is pleased to provide its inputs on the review of the EU securitisation framework, a key proposal in the context of the Savings and Investments Union (SIU) to revive EU capital markets. Despite being a fundamental pillar of well-functioning capital markets, securitisation -both for mortgage and SME loans assets- remains significantly underutilised in Europe, especially in comparison with the US market. We believe that in the present, complex, global scenario, it is crucial to look at the review of the EU Securitisation legislative framework through a competitiveness lens.
In order to tackle the issues emerging from the current regulatory framework, we believe that legislators should prioritise:
• Fostering alternative SME-financing options by establishing a supportive regulatory environment for SME-backed securitisation. We believe that securitisation can play a key role in enhancing SMEs access to capital markets, while, strengthening at the same time traditional financing channels, such as bank lending. Furthermore, these objectives fully align with the broader ambitions of the Savings and Investments Union to enhance participation to EU capital markets and reinforce the EU economy.
• The simplification of the due diligence process, by adopting a more principle-based, proportionate and less complex approach. In particular, targeted amendments to Article 5 SECR (see page 5 “Concrete changes to SECR Article 5 on “due-diligence requirements for institutional investors”) are necessary to remove excessive compliance burdens that are weighing on market participants.
• Amending the classification of STS and non STST transactions for calculating the LCR ratio to support both the primary and the secondary securitisation market in terms of pricing and market liquidity.
• Finally, as prudential requirements for securitised assets are particularly high, making securitisation not attractive in terms of cost-effectiveness of the transaction, lowering the capital requirements for holding securitisations, through a RW floor proportional to the underlying portfolio/pool capital and by reducing the p-factor, consistently for all prudential methods (SEC-SA but also SEC-IRBA, SEC-ERBA & IAA), should be pursued.
The EACB believes these suggestions will contribute to establish a more conducive environment for cooperative banks to fully benefit from securitisation.
Download our position paper for more information.