The European Parliament’s Committee on Economic and Monetary Affairs (ECON) was called upon to vote on Monday 9 and Tuesday 10 November on the adjustments to the European framework on securitisation proposed by the Commission in July to support the post-Covid-19 economic recovery (see EUROPE 12535/11).
Both legislative proposals are designed to facilitate the use of securitisation – an instrument that allows banks to pool loans, convert them into securities and sell them in the capital markets.
Originally scheduled for the end of October, votes on the draft reports by Paul Tang (S&D, the Netherlands) and Othmar Karas (EPP, Austria) were postponed to early November to give the political groups more time to agree on sensitive issues, such as how to include sustainability considerations in the framework and how to ensure that the macro-prudential risks of any increase in synthetic securitisation can be minimised.
The results of the votes on the amendments were not yet known at the time we went to press, but, MEPs are expected to suggest some changes to the Commission's original proposals, according to the compromises reached between the political groups and seen by EUROPE.
‘STS’ securitisations recorded in the balance sheet. As part of the draft report prepared by Mr Tang, MEPs are generally expected to support the enlargement of the European Union framework from simple, transparent and standardised securitisations (STS) to on-balance-sheet synthetic securitisations – which is a type of securitisation in which the originator retains ownership of the underlying exposures, unlike traditional securitisations, where these exposures are normally sold to another entity – while seeking to reduce some of the complexity of these products.
The final text should also require the European Systemic Risk Board (ESRB) to publish no later than 31 December 2022 a report analysing the impact and possible systemic risks to financial stability arising from the introduction of the STS label for on-balance sheet securitisations.
It should further specify that ‘securitisation special purpose entities’ should be established in non-Member States that are not listed by the EU as high-risk countries for money laundering or as non-cooperative jurisdictions for tax purposes.
More sustainable securitisation products. The political groups also agreed that the development of a specific framework for sustainable securitisation should be considered.
The text should therefore instruct the European Banking Authority (EBA), in close cooperation with the other European financial supervisory authorities, to publish a report by 1 November 2021 on the development of such a framework.
This report should in particular assess the introduction of sustainability factors, the implementation of disclosure and due diligence requirements, the presentation of information on adverse environmental, social and governance impacts and any potential impact on financial stability.
On the basis of this report, the European Commission should then present a report on the creation of a specific framework for sustainable securitisation to the European Parliament and the EU Council, accompanied by a legislative proposal, if necessary.
Securitisation of non-performing exposures. The draft report prepared by Mr Karas also recognises the need to introduce specific treatment for securitisations of non-performing exposures, which would allow banks to lend more and lighten their balance sheets.
Furthermore, in order to ensure effective involvement of Parliament, the text should give a mandate to the European Commission to review the supervisory treatment of securitisations of non-performing exposures and to present a legislative proposal, if appropriate, before 31 December 2020 to Parliament and the Council of the EU.
MEPs also want to mandate the EBA to monitor the market for securitisations of non-performing exposures and to report to Parliament and the Commission on whether the treatment of regulatory capital for securitisations of non-performing exposures should be reviewed in the light of market developments following the Covid-19 pandemic.
It should be noted that the GUE/NGL group has proposed rejecting the two Commission proposals, believing that they would deregulate certain elements of the financial sector and would not be solutions for the real economy, but only for the financial sector. (Original version in French by Marion Fontana)