Capital Markets Union: EU reaches agreement on reviving securitisation market
The European Commission has welcomed tonight's agreement to revive the EU's securitisation market, in a move that will broaden investment opportunities for investors and boost lending to Europe's households and businesses.
Late on Tuesday, the European Parliament, the Council and the Commission agreed on a package that sets out criteria for simple, transparent and standardised securitisation (STS). The deal is one of the cornerstones of the Capital Markets Union (CMU), the Juncker Commission's pivotal project to build a single market for capital in the EU. The swift implementation of the securitisation package could unlock up to EUR 150 billion of additional funding to the real economy.
Securitisation can allow diversification of funding sources and a broader distribution of risk by allowing banks to transfer the risk of some exposures to other institutions or long-term investors, such as insurance companies and asset managers. This allows banks to free the capital they set aside to cover for risks of those exposures, allowing them to generate new lending to households and SMEs. STS securitisations will also provide new investment opportunities for institutional investors such as pension funds and insurance companies.
Valdis Dombrovskis, Vice-President responsible for Financial Stability, Financial Services and Capital Markets Union, said: "This agreement marks another big step towards the creation of a Capital Markets Union. It will help build a sound and safe securitisation market in the EU, bringing real benefits to investment, jobs and growth. It will free up bank lending so that more financing can go towards supporting our companies and households."
The new regulatory framework agreed by co-legislators sets out a risk-sensitive, transparent and prudential treatment of securitisation. At the same time, the package also ensures an appropriate capital treatment of securitisation instruments in general.
The recent political agreement will be followed by further technical talks to finalise the text. The Permanent Representatives Committee (COREPER) of the Council of Ministers is expected to endorse the agreement ahead of the European Parliament's plenary vote.
In September 2015 the European Commission proposed new rules on securitisation as part of the Capital Markets Union (CMU) action plan (IP/15/5731). The Commission proposed a regulatory framework for securitisation which is simple, transparent and standardised and subject to adequate supervisory control. According to the Commission's estimates at the time, if EU securitisation issuance was built up again to the pre-crisis average, it would generate up to EUR 150bn in additional funding for the economy.
Securitisation is the process where a financial instrument is created, typically by a lender such as a bank, by pooling assets (for example car-loans or SME-loans) for investors to purchase. This facilitates access to a greater range of investors, thereby increasing liquidity and freeing up capital from the banks for new lending.
The new EU legal framework provides a clear set of rules to ensure that STS benefits the real economy. It bears no relation to the securitisation of subprime mortgages created in the US that contributed to the financial crisis. The European Commission does not intend to go back to the days of opaque and complex subprime instruments. Instead, the new rules clearly differentiate between simple and more transparent securitisation products and other products which do not satisfy such criteria. This will restore an important funding channel for the EU economy without endangering financial stability.
Latest News from
Council agrees on emergency measures to reduce energy prices03/10/2022 16:33:00
EU energy ministers recently (30 September 2022) reached a political agreement on a proposal for a Council Regulation to address high energy prices.
Guidelines on general visa issuance in relation to Russian applicants and controls of Russian citizens at the external borders03/10/2022 15:25:00
The Commission recently (30 September 2022) presented updated guidelines to Member States on visa procedures as well as on border controls for Russian citizens at the EU's external borders.
Message of President Charles Michel on Russia's illegal annexation of Ukrainian regions03/10/2022 14:33:00
Message of President Charles Michel on Russia's illegal annexation of Ukrainian regions (30 September 2022).
Ethiopia: Statement by Commissioner Lenarčič on the humanitarian situation and International Humanitarian Law in northern Ethiopia03/10/2022 13:25:00
Ethiopia: Statement given recently (30 September 2022) by Commissioner Lenarčič on the humanitarian situation and International Humanitarian Law in northern Ethiopia.
Antitrust: Commission upgrades eLeniency tool to grant companies online access to leniency and settlement documents03/10/2022 12:10:00
The European Commission has upgraded its online platform “eLeniency” to ensure that companies who are parties to cartel and antitrust proceedings can easily and securely access documents online.
State aid: Commission approves aid to support the resolution of the Polish Getin Noble Bank S.A.03/10/2022 11:33:00
The European Commission has approved, under EU State aid rules, several support measures in the context of the resolution of the Polish Getin Noble Bank S.A.
Council and Parliament reach provisional political agreement on access to Union waters, extending the current rules for fishermen for another ten years30/09/2022 15:25:00
The Czech Presidency of the Council of the European Union and the European Parliament reached a provisional political agreement as regards the regime for access of fishing vessels to member states’ territorial waters.
Ensuring radiation protection: Commission refers LATVIA to Court to guarantee citizens' protection from ionising radiation-exposure risks30/09/2022 14:33:00
The Commission is taking legal steps to ensure the protection of citizens, workers and patients against the dangers arising from exposure to ionizing radiation.
Investor citizenship scheme: Commission refers MALTA to the Court of Justice30/09/2022 13:25:00
The European Commission yesterday decided to refer Malta to the Court of Justice of the European Union for its investor citizenship scheme, also referred to as the ‘golden passports'.
Human rights: EU increases support to the protection of human rights defenders worldwide30/09/2022 12:38:00
Human rights are increasingly under threat worldwide. Against this global backdrop, reconfirming the European Union's strong support to human rights, fundamental freedoms and democracy, and their defenders worldwide, Commissioner Jutta Urpilainen yesterday signed €30 million, a substantial increase, for the new phase of the EU Human Rights Defenders Mechanism, in the presence of civil society organisations and human rights defenders, for the period 2022–2027.