EU proposals on securitisation: It is the right approach

The German Banking Industry Committee (GBIC) welcomes the EU Commission’s recognition of the importance of the European securitisation market and the concrete proposals for reform it has put forward today. The planned simplifications on due diligence, reporting and supervisory processes are a step in the right direction.

“The Commission has made some important proposals. Reducing bureaucratic hurdles, in particular, was well overdue,” said Heiner Herkenhoff, CEO of the Association of German Banks, which is this year’s GBIC coordinator. “Securitisations are an essential financing instrument. They represent a vital bridge between lending and the capital market and are therefore a key element in financing the transformation and innovation.”

However, the GBIC takes a much more critical view of the proposals for structuring capital requirements. These are considered a key stumbling block to revitalising the European securitisation market.

“When it comes to capital requirements, for example, the Commission is adding to the complexity by introducing a new category of resilient securitisations and the strict conditions are acting as a brake on the market,” said Herkenhoff. “If you are serious about creating a strong European securitisation market, you need to structure capital requirements in such a way that the simplifications will apply to the majority of securitisation transactions.”

Despite some positive individual measures, the GBIC has criticised the fact that the overall proposals are less convincing. In the GBIC’s opinion, a half-hearted implementation would not provide enough of a stimulus. The current proposals fall short of expectations in key areas, meaning that the impetus to revitalise the market is once again in danger of fizzling out.