In a report published on Thursday 25 April, the eight experts on the committee chaired by former Governor of the Banque de France Christian Noyer recommend developing long-term European savings products, stimulating financial securitisation and strengthening financial supervision at the level of the European Securities and Markets Authority (ESMA).
According to the experts, savings are abundant in the European Union, estimated at €35,000 billion, but poorly allocated, mainly because of the type of savings products and the tax framework, which discourages long-term investment.
To remedy this situation, the committee recommends that long-term savings products be actively developed. “The failure of the PEPP [pan-European Personal Pension Product], the proliferation of existing products and the specificity of national frameworks suggest favouring a decentralised approach based on common principles”, it stresses. This label would be based on six fundamental principles, such as a long-term investment horizon, a key role for the employer, an attractive tax framework and a focus on ‘green’ investments.
The experts’ second key proposal is to “revitalise the securitisation market, to back the lending capacities of European banks by deep capital markets”. In Europe, this market collapsed between 2007 and 2022, with total annual issuance of securitised assets falling from €407 billion to €157 billion over this period.
The committee believes it is “imperative to quickly correct the regulatory and prudential framework for securitisation”. “The first priority should be to restore the investor base by correcting the prudential framework applicable to insurers and by extending the eligibility to liquidity buffers for banks (LCR)”, it says. Secondly, transparency rules should be simplified to facilitate both the issuance and acquisition of securitised assets. Thirdly, the banking prudential framework at European level needs to be “corrected”, it adds, even if this means deviating from the Basel Committee’s international standards, as the United States is doing.
“All these regulatory and prudential measures are now well identified and mostly consensual. The only missing element is a rapid implementation schedule”, note the experts, who also suggest creating “a European platform for securitisation”.
The Noyer committee’s third proposal is to “move towards integrated supervision of capital market activities”. To move forward, reform of ESMA’s governance (creation of an executive board with a small number of permanent members) and operations (creation of joint supervisory teams) is “essential” and “a prerequisite” for the authority to become a genuine direct supervisor.
“Thus reformed, ESMA should be entrusted with larger supervisory mandates, through mandatory and voluntary schemes”, the experts note. Clearing houses (CCPs) and central securities depositories (CSDs) with a cross-border and systemic dimension, as well as the largest cross-border trading platform operators, would be subject to mandatory supervision at European level.
See the ‘Noyer’ committee’s report: https://aeur.eu/f/bz6 (Original version in French by Mathieu Bion)