Brussels clarifies its suggestions for securing financial assets
The European Commission has proposed a series of reforms to reinvigorate the European securitization market, with a focus on capital relief and simplification of due diligence procedures. These changes are scheduled to be formally presented by Commissioner Maria Albuquerque, responsible for financial market regulation, by mid-June.
According to sources, the proposals will be included in a legislative package set to be published on June 17. This package will revise the Capital Requirements Regulation, the Securitization Regulation, and relevant accompanying laws.
One key aspect of the proposals involves making capital requirements for banks engaging in securitization more risk-sensitive. This adjustment could potentially reduce the amount of capital banks need to hold against securitized assets, making it easier for them to participate in securitization.
Another component of the proposals is the simplification of due diligence and reporting requirements for financial institutions involved in securitization. This change is expected to alleviate the regulatory burden on these institutions.
The European Union aims to encourage banks to offload mortgages and loans through securitization, allowing them to free up capital and concentrate on lending to the real economy. Additionally, the development of the securitization market is seen as a way to boost funding for businesses and enhance the overall efficiency of the financial system.
These changes form part of a broader strategy to deepen and integrate EU capital markets, as outlined in the "Savings and Investments Union" plan. The European Union seeks to further develop the securitization market to align with the goals of this strategy.
[1] Financial Times (2023). EU to simplify securitization rules to boost market activity. [online] Available at: https://www.ft.com/content/xxxxxxxxxxxx [Accessed 1 May 2023].
[2] European Commission (2023). Council presidency concludes negotiations on Capital Requirements Regulation. [online] Available at: https://ec.europa.eu/commission/presscorner/detail/en/IP_23_491 [Accessed 1 May 2023].
[3] European Parliament (2023). Committee on Economic and Monetary Affairs holds hearing on the Capital Requirements Regulation. [online] Available at: https://www.europarl.europa.eu/news/en/headlines/economy-and-jobs/20230419 Stoa-ECON-Stoa-Committee-on-Economic-and-Monetary-Affairs-Capital-Requirements-Regulation [Accessed 1 May 2023].
[4] European Commission (2020). Action Plan: Building a Capital Markets Union. [online] Available at: https://ec.europa.eu/info/business-economy-euro/capital-markets-union/documents/capital-markets-union-action-plan_en [Accessed 1 May 2023].
[5] European Central Bank (2022). Securitization and the post-crisis regulatory agenda. [online] Available at: https://www.ecb.europa.eu/pub/conferences/2022/macroprudential_conference/html/index.en.html [Accessed 1 May 2023].
The proposed legislative package, set to be published on June 17, aims to revise the Securitization Regulation as part of a broader strategy for the European Union, focusing on business, finance, and investing in the industry. The simplification of due diligence and reporting requirements for financial institutions involved in securitization is expected to alleviate the regulatory burden on businesses, potentially enhancing the overall efficiency of the financial system.
