Brussels, 10/12/2014 (Agence Europe) - EU finance ministers want the European Commission to unveil draft legislation by the summer of 2015 to revive the market for 'simple and transparent' covered products.
In a conclusions document published on Tuesday 9 December, the Ecofin Council recognised the necessity to make it easier for a well-regulated securitisation market to emerge that would encourage the financing of SMEs by spreading the lending risk over the financial markets. Welcoming a roadmap on this issue drawn up by Council experts (see EUROPE 11140), the ministers urged the Commission “to develop a proposal for a dedicated EU framework for securitisation as a matter of priority” that focuses on “simple and transparent products” and would boost legal security for all stakeholders.
Securitisation turns loans into securities, which are then bundled and sold on the market. It improves financial liquidity, but is criticised for helping spread the financial crisis that arose from the selling of risky US mortgage loans (the 'subprime' market).
The move to breathe new life into the securitisation market is part of a general move to encourage the financing of the real economy from non-bank sources. The ministers approve of the Commission's plan to publish an action plan on a union of capital markets by next summer. Another area of action is the emergence of a European framework for private investment, and the Commission is invited to assess private initiatives in this domain. The Commission will also examine the utility and feasibility of a harmonised system for covered bonds at EU level in the light of proven experiences in the member states. Likewise for crowdfunding. The ministers feel it would be useful to explore the pros and cons of mini-bonds as a way of boosting financing opportunities for SMEs.
The Ecofin Council says that this work will be facilitated by greater comparability of information about loans and invites the Commission to draw up a balance sheet of national lending initiatives to see what action would be the most appropriate to make it easier for all borrowers to access information about sources of lending and the granting of cross-border loans. (MB)