The European Parliament’s Committee on Economic and Monetary Affairs (ECON) adopted, on Tuesday 10 November, with 36 votes to 23, the draft reports by Paul Tang (S&D, the Netherlands) and Othmar Karas (EPP, Austria) on adjustments to the EU framework on securitisation, proposed by the Commission in July to help economic recovery post-Covid-19 (see EUROPE 12535/11).
All the compromise amendments were adopted (see EUROPE 12598/15) as expected, and MEPs approved, on the same day, the opening of interinstitutional negotiations with the EU Council, which adopted its position at the end of October (see EUROPE 12586/30).
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.
“What was once a poison is now a cure for economic decline as a result of the coronavirus. The right mix of financial instruments, such as securitisation, can accelerate the recovery because, on the one hand, new investment opportunities are created and, on the other hand, banks have more room for manoeuvre to grant new loans to households and companies”, explained Mr Karas in a statement after the vote.
The texts adopted maintain the proposal to introduce a specific treatment for securitisations of non-performing exposures, which would allow banks to lend more and lighten their balance sheets.
MEPs also support the extension of the Simple, Transparent and Standardised Securitisation (STS) framework to on-balance sheet synthetic securitisations – a type of securitisation in which the originator retains ownership of the underlying exposures, as opposed to traditional securitisations, where these exposures are normally sold to another entity.
“We want to give banks the breathing space they need to play their part in kick-starting the economy, but not let them run wild and engage in the irresponsible behaviour which led to the 2008 financial crisis. By enlarging the framework for Simple, Transparent and Standardised securitisation products, we can achieve the right balance”, Mr Tang assessed.
MEPs also want to promote sustainable securitisation products and call on the European Banking Authority (EBA) and the Commission to look into the matter. (Original version in French by Marion Fontana)