The AFME report “EU Securitisation back on track – AFME’s 5-point plan” sets out comprehensive recommendations to revitalise the European securitisation market. The main proposals are summarised here:
- Increasing the risk sensitivity within the bank prudential framework: AFME proposes to increase the risk sensitivity within the banking prudential framework in order to strengthen the incentives for banks to participate in the securitisation market.
- Reviving demand from the insurance sector: The report recommends a review and adjustment of the treatment of securitisations under Solvency II in order to make securitisation products more attractive for insurance companies.
- Adjustment of the treatment of securitisations in the liquidity coverage ratio (LCR): AFME calls for a more flexible treatment of securitisations under the LCR to increase their liquidity and attractiveness.
- Introduction of proportionality for investors when conducting regulatory due diligence: A simplification of regulatory due diligence requirements for investors is proposed in order to lower barriers to entry and operating costs.
- Fine-tuning of regulatory reporting and simplification of the criteria for simple, transparent and standardised (STS) securitisations for both traditional and synthetic securitisations: The proposal aims to reduce the complexity and bureaucracy currently associated with compliance with the STS criteria.
These measures are to be implemented at an early stage of the new European Commission’s mandate to build on the ambitions of the European Council and promote the use of securitisation as a financing tool in both the private and public sectors, which in turn should drive competitiveness and growth in the EU.