Brussels, 04/03/2016 (Agence Europe) - The Association for Financial Markets in Europe (AFME) said on Friday 4 March that it is “very disappointed by the apparent delay recently announced by the Parliament” for the draft legislation to revitalise securitised financial products, included in the draft Union of Capital Markets (see EUROPE 11400). This was the view expressed to EUROPE by Richard Hopkin, AFME's director general with responsibility for matters relating to securitisation.
As reported by the Financial Times the day before, the draft European Parliament timetable foresees a vote at the economic affairs committee in November and in plenary in December on its own position. The interinstitutional negotiations would then begin in 2017 with the Council of the EU, which reached a broad agreement in principle in December 2015 (see EUROPE 11445).
In December, the president of the European Commission, Jean-Claude Juncker, wrote to the president of the European Parliament, Martin Schulz, expressing concern at the EP's lack of speed on this matter. Schulz wrote back in January, saying he was “surprised” at the concerns, and that the EP would “as usual work in a diligent and thorough manner on both files. The proposals are both technically complex and politically sensitive and for these reasons deserve particular attention and explanations by elected representatives”. At the EP, people confirm that the rapporteur on one of the proposals on securitisation, Dutch national Paul Tang (S&D), wants the question to progress in parallel to the proposal to introduce a European deposit insurance system (EDIS).
AFME says that the European securitisation market is shrinking fast. “The introduction of very high capital charges for insurer investors under Solvency II (effective 1st January 2016) has also driven insurer investors away”, said Hopkin.
Since there is still time to move the cursor of the future securitisation rules, AFME has joined forces with EFAMA, ICAM and Insurance Europe. On Thursday, these organisations published recommendations. They say “the institutional investor should be able to perform a general oversight of the asset manager's due diligence and not also be required to conduct the due diligence directly itself” in terms of respect for the criteria that define a product as simple, transparency and standardised (STS). On the retention of some of the risks related to securitisation, while the industry supports moving to a direct approach (unlike for the rules in force in each sector), it “is concerned that it should be clear that the obligation only arises for entities involved in the securitisation and in respect of entities established in the EU”. Industry “considers it to be essential that the new retention regime applies (directly and indirectly via the due diligence obligations) in respect of transactions established on or after the effective date of such regime only”. The bodies explain: “We welcome the inclusion of ABCP (Ed: short-term securities backed by commercial debt) in the proposed STS framework (…) but as currently drafted the vast majority of the ABCP transactions will not qualify as STS.”
Finally, in terms of penalties, industry calls for greater proportionality. The penalties should only apply in the event of negligence or bad management. Industry feels the 'third country' proposals are over-restrictive. (Original version in French by Elodie Lamer)