Brussels, 03/12/2015 (Agence Europe) - On Wednesday 2 December, the national ambassadors to the EU (Coreper) reached an agreement on two legislative proposals aiming to give a shot in the arm to the markets for securitised financial products, both of which have been included in the Capital Markets Union project (see EUROPE 11400).
“These proposals aim to relaunch the securitisation market, by promoting simple, transparent and standardised securitisations. The objective is to contribute to the financing of the economy and hence to the creation of jobs and growth”, said the Luxembourg finance minister, Pierre Gramegna.
A proposed regulation, which will apply across the board to the entire financial sector (banks, asset management, insurance), lays down criteria to allow securitised products to be categorised as simple, transparent and standardised (STS). This concept does not refer to the quality of the financial assets underlying the securitised products, but to the process used to structure the securitisation technique.
The member states agreed to the obligation upon the issuer of a securitised asset to retain at least 5% of the credit portfolio, a provision included in the initial proposal.
Securitisation is a technique which allows banks to convert the lending they issue (mortgages, consumer credit) into financial securities, which titrisation can then be resold on the markets. Although it stands accused of fanning the flames of the financial crisis of 'sub-prime' mortgages in 2008, this financial technique allows banks to lighten their balance sheets and, ultimately, to lend more to the economy.
A second regulation relaxes the treatment, in terms of own funds, of securitised products labelled STS.
On Tuesday 8 December, the Ecofin Council will approve this political agreement in principle, assuming that Denmark, Finland and the Netherlands lift their parliamentary reservations by then. Inter-institutional negotiations will start in 2016, once the committee on economic and monetary affairs of the European Parliament has agreed on its position. (Original version in French by Mathieu Bion)