Securitisations play a decisive role in financing the European economy by linking bank-based financing with capital markets. They expand the investment spectrum for investors, increase the scope for banks to extend loans and are therefore particularly important in helping to finance the green and digital transformation. The current weakness of the European securitisation market, which is considered to be too small and lacking in liquidity, has also brought politicians onto the scene. The final report of the Financial Industry Initiative published today aims to provide substantial information and support policy makers with concrete proposals to strengthen the market.
The Financial Industry Initiative (“Taskforce Verbriefungen”) launched jointly by the Association of German Banks (Bundesverband deutscher Banken e.V.) and True Sale International GmbH is supported by the Federal Ministry of Finance and is under the patronage of Dr Manfred Knof, CEO, Commerzbank AG. He publicly presented the final report to the Federal Ministry of Finance today.
Challenges and necessary reforms
From the perspective of the initiative, the high regulatory burden is the central challenge for the development of the securitisation market. It leads to high transaction costs for banks and investors. As a result, securitisation is becoming less attractive as a financing instrument and investors are switching to other forms of investment. The final report makes it clear that there is no simple solution, but that a number of reforms are required to revitalise the market in the long term. The report proposes a series of adjustments that should make securitisation easier for originators such as banks and commercial enterprises as well as for investors.
Regulatory measures to directly strengthen the securitisation market
Several concrete measures are proposed to strengthen the European securitisation market. These include in particular:
- More appropriate due diligence obligations for investors,
- Targeted transparency and reporting requirements,
- Tightening of the STS regulations,
- Revision of the capital requirements,
- Better eligibility of securitisations in the regulatory liquidity ratios,
- Simplification of SRT processes,
- Risk-adequate adjustment of capital requirements for insurance companies.
Other helpful measures
Other conceivable measures include the establishment of state-supported securitisation platforms or the use of state guarantees. However, priority should be given to reforming the regulatory framework, as these measures can be implemented more quickly and are essential for a sustainably functioning market and do not require public funding.
An efficient securitisation market can also contribute to financing the green transition. The market for green securitisations is still underdeveloped, but the regulatory measures indicated could provide new impetus.
At national level, it is proposed that a German Securitisation Act be passed to eliminate legal uncertainties and regulatory gaps and thus strengthen Germany as a financial centre. This law could be supported by harmonisation with the European legal framework.
Walk the Talk
This report joins the publications by Noyer (see TSI kompakt of 2 May 2024), Paris EuroPlace (see TSI kompakt of 31 July 2024) and Draghi (see TSI kompakt of 9 September 2024). The Financial Industry Initiative also aims to contribute to strengthening Europe’s competitiveness and mastering the upcoming challenges of the green and digital transformation. The report addresses the same starting points for strengthening the European securitisation market as the other publications, but goes one step further by making concrete legislative proposals. It is now up to policymakers to move from talk to action – ‘walk the talk’.
To the press release (ger)