The Impaired EU Securitization Market: Causes, Roadblocks and How to Deal With Them
European Central Bank and Bank of England
Download Document| Date Published | 2014 |
| Version | |
| Primary Author | European Central Bank and Bank of England |
| Other Authors | |
| Theme | The Secondary Market |
| Country |
Abstract
The securitisation market in the EU continues to be impaired. Public issuance of Asset Backed Securities (ABS) remains very limited and mostly concentrated in a few jurisdictions. The market is shrinking. This is a concern because securitisation, if appropriately structured and regulated, can complement other long-term wholesale funding sources for the real economy, including for small and medium-sized enterprises (SMEs). Furthermore, if a sufficient share of the overall ABS issuance were publicly placed, this could translate into a diversified funding source for banks and potentially transfer credit risk to non-bank financial institutions, thereby providing capital relief that could be used to generate new lending to the real economy. This note assesses the current EU securitisation market, including from a forward looking perspective. A particular focus is the promotion of simple structures and well identified and transparent underlying asset pools with predictable performance (so-called ‘high-quality’ securitisation), while still impeding the resurgence of the more complex and opaque structures that contributed to the financial crisis. This short paper was prepared for the G20/IMF Spring meetings. A longer, more substantive joint discussion paper will be issued in May.