In Strasbourg on Thursday 26 October, MEPs finally approved two inter-institutional agreements setting out new rules to protect investors in repackaged loans from non-performing loans, despite considerable misgivings voiced by the political groups during the debate preceding the vote.
The agreement on the legislative proposal to bring in criteria to label securitised products 'simple, transparent and standardised' (STS), which was reached between the European Parliament and the Council on 30 May this year (see EUROPE 11799), was adopted by 459 votes to 135 and 23 abstentions. The text on the preferential treatment of equity, which adds to the securitisation framework, was adopted by 458 votes to 135 and 26 abstentions.
Securitisation is controversial due to its credit risk vector role in the sub-prime financial crisis of 2008. Rapporteur Paul Tang (S&D, Netherlands) considers that this toxic product has been transformed into a medicine for the European economy. However, like any medicine, it can be toxic if taken without controls, he added, stressing the many safeguards set in place by the Parliament.
The institutions have decided to ban re-securitisation (securitisation of instruments already securitised) for new transactions issued following the regulation's entry into force, with a few well-defined exemptions. On the risk retention threshold, the final text provides for an obligation for the issuer of the securitised asset to retain at least 5% of its credit portfolio.
Persistent clashes. Just hours ahead of the vote, the differences of opinion between the political groups were still significant. “So far, what we have done does not match our rhetoric”, said Kay Swinburne (ECR, UK), who was hoping for a more ambitious package.
The GUE/NGL and EFDD Groups both reiterated their reservations. The Greens/EFA Group, which told the debate that it planned to vote against the package, criticised a “poor agreement for the average citizen” and the member states' lack of interest in the security of the market.
“Today, a historical opportunity to reduce the financial risk from securitisation was wasted”, MEP Sven Giegold (Greens/EFA, Germany) said in a press release following the vote, accusing the Conservatives, Liberals and Eurosceptics of the European Parliament of working towards legislation that makes no progress in terms of stability and transparency. Having called for a risk retention threshold of 25%, the Greens/EFA are by no means satisfied with the 5% decided upon.
“This is not the end of the debate”, said Tang by way of reassurance, adding that there would be a revision of the legislative package in the future and that when the time comes, the Parliament must closely follow developments on the market.
An addendum to the text on self-certified mortgages. After the inter-institutional agreement was reached, it would appear that the text has been amended again by the European institutions, Market News reported in early October. The amendment in question reportedly aims to remedy the implicit prohibition on the securitisation of self-certified mortgages created by the text in response to concerns expressed by the financial industry.
The amendment is reported to have been included in the text during the linguistic examination process – to be voted on by the Parliament before the text is signed – so that no future discussion will be necessary. (Original version in French by Marion Fontana)