Together with the German Banking Industry Committee (GBIC) and in close cooperation with its stakeholders from the TSI partner network, TSI today responded to the consultation on securitisation regulation. The European Commission’s Directorate-General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA) invited to this consultation on 9 October and asked about all key areas of securitisation regulation (see TSIkompakt from 9 October 2024).
No silver bullet: A series of necessary measures that do not lead individually, but only combined, to a strengthening of the financing conditions and EU’s competitiveness
In a very intensive process due to the tight deadline of eight weeks, TSI and GBIC, in cooperation with their German and European network, have worked out the following core aspects, which were essentially already formulated in the final report of the German securitisation task force:
- Reduction of capital requirements: The capital requirements for banks and insurance companies must be revised and the overcapitalisation of securitisations decided in 2018 must be corrected. In view of the default rates of European securitisations over the last 25 years, we need to return to risk-adequate risk weights. This step is fundamental for more investors from the banking and insurance sectors to join the market. Other important points include LCR recognition in the High Quality Liquid Assets 2a category and improvements to the regulatory approval process for the SRT.
- Return to a principle-based regulation: The over-bureaucratised and detailed regulation has to be corrected, particularly in the areas of due diligence (Article 5 of the Securitisation Regulation) and transparency (Article 7 of the Securitisation Regulation). The due diligence regulations must be made more market-oriented in order to facilitate investments in securitisations for a broad base of institutional investors. The transparency regulations must be more targeted towards the addressees; in particular for private transactions, a move away from reporting at loan level is necessary in order to eliminate unnecessary costs.
- No European platform with a high degree of regulation: The European credit markets are too heterogeneous to establish a European securitisation platform with a high degree of standardisation in the short and medium term, regardless of the involvement of state guarantees. Such a platform would require a pan-European harmonisation of the legal provisions for loans and similar products themselves, for the processes involved in lending and ongoing servicing through to accounting and IT. This harmonisation is neither necessary nor sufficient to strengthening the securitisation markets in the short and medium term. If the harmonisation of these different areas of law is tackled in the EU, this should be initiated independently of the securitisation regulation. We refer to our final report “German Securitisation Platform”, which was also taken up in the consultation.
The positions submitted were also aligned optimally with the other European associations under the coordination of AFME.
Urgent need for political action
The European Commission is expected to transform the results of the consultation into a legislative proposal in the first half of 2025. This must urgently implement the above-mentioned measures – the enormous upcoming investments in the digital and green transformation require extensive private funding, especially in times of high national debt. Europe’s competitiveness must be maintained. With 70-80% bank-based debt financing in the future, the securitisation markets are a fundamental link to the private capital markets. A genuine capital markets union must be created now, with securitisation as part of it. It is very important not to link long-term issues (harmonisation of European insolvency laws, European securitisation platform) and thus delay the political process.