The Parliament took its time, but it managed, on Thursday 8 December, officially to agree on the proposed regulation of the Commission aiming to revitalise the European securitisation market (see EUROPE 11387). The Council has been waiting for it to do so for a year (see EUROPE 11445).
Securitisation is a technique that allows banks to convert the loans it grants (mortgages, consumer loans) into financial securities in order to resell them on the markets. Although it has been accused of helping to spread the 'sub-prime' lending financial crisis of 2008, this financial technique allows banks to reduce their balance sheets and ultimately to lend more to the economy.
The proposal, which will be applied consistently to the whole of the financial sector (banks, asset management, insurance) lays down criteria to identify simple, transparent and standardised securitised products (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 main bone of contention between members of the European Parliament was the risk retention threshold, which the initial report by Dutch MEP Paul Tang (S&D) increased from 5% to 20%, as advised by the NGO Finance Watch (see EUROPE 11572). This position was welcomed by the Greens/EFA and GUE/NGL groups, but roundly criticised by the EPP, ECR and ALDE. The Commission itself pointed out that the threshold of 5% it had selected was that of the European Banking Authority (EBA). After several months of negotiations, the political groups have therefore now agreed on a figure of 10%, with a handful of exceptions (if the EBA so decides, if market conditions so require). Additionally, banks would be able to go back down for the 'first losses' tranches.
The member states, for their part, adopted the obligation upon issuers of securitised assets to retain at least 5% of their credit portfolios.
As Tang stressed, securitisation on the basis of instruments that have already been securitised will be prohibited, a point welcomed by Austria's Othmar Karas, shadow reporter for the EPP. Infringements will be sanctioned. Parliament's position also creates a public register of all securitisations in the EU.
The European Securities and Markets Association has expressed concern at the outcome of the negotiations between the political groups of the European Parliament, particularly regarding the transparency obligations and the retention threshold, which it feels are too high.
The NGO Finance Watch sees the glass as half full, stating in particular that it feels that the risk retention threshold is excessively high. (Original version in French by Élodie Lamer)