The Draghi report ‘The Future of European Competitiveness’ (Part A [in the same directory] and Part B [in the same directory]) was published today. On almost 400 pages, numerous approaches to strengthening Europe’s competitiveness are discussed by selected economic sectors and policy areas. A central theme of the report is the mobilisation of private capital to promote investment financing. Against the backdrop of the urgent need for sustainable growth in the context of the green and digital transformation, the report identifies fragmented capital markets and specific regulatory restrictions in the European banking sector as one of the main reasons for insufficient investment to date. As a result, European banks are less likely to use securitisation compared to their US counterparts. This hinders risk transfer opportunities, capital relief, and further development of the capital market. Thus, a revival of the securitisation market could help to better integrate the fragmented capital markets in the EU.
Starting points for reviving the securitisation market
With regard to the European securitisation market, the Draghi report proposes the following measures as central to its revival:
- Reducing capital requirements,
- Improving transparency rules,
- Adjustment of due diligence requirements and
- Introduction of platform solutions.
The latter proposal takes up ideas from the Noyer report (see TSI kompakt of 2 May 2024). Capital and transparency requirements and due diligence obligations have been key issues in the financial sector for years, particularly in the securitisation industry. It is therefore pleasing that the Draghi report explicitly addresses these key aspects of the reform debate.
Paradigm shift in Europe
The Draghi report is a valuable addition to a series of similar analyses that have repeatedly concluded that the EU needs a strong securitisation market (see also TSI kompakt of 31 July 2024). It is particularly noteworthy that the report clearly illustrates the already noticeable paradigm shift from a focus on the European Green Deal to strengthening Europe’s competitiveness. It is generally recognised that the green and digital transformation requires a suitable regulatory framework to finance it. However, the fact that strengthening Europe’s competitiveness is emphasised as a decisive prerequisite for sustainable growth could give the reform debate new impetus.