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Financing of the EU economy - Is the EU securitization proposal up to the challenges?
Securitisation and the Capital Markets Union
By Zalba Bidegain Pablo - MEP, Vice-Chair of the Economics and Monetary Affairs Committee, European Parliament
The European Union is facing a challenging environment; the European Institutions have to deliver and work to promote investment in growth and jobs to reactivate the economy. The Capital Markets Union goes in this direction and we have to ensure the goal is achieved.
The Securitization Package, presented by the European Commission in 2015, is aimed at promoting a sustainable, deep, liquid and robust market for securitisation, this will help attract a more diversified and stable investor base to help channel funds to where they are most needed in the European economy.
This proposal is composed of two pillars: first the STS proposal which will apply to all securitisations and include the due diligence, transparency and risk retention rules to create Simple, Transparent and Standardised (STS) securitisation; secondly a proposal to amend the Capital Requirements Regulation (CRR) to make the capital treatment of securitisations for banks and investment firms more risk-sensitive and able to reflect properly the specific features of STS securitisations.
With this proposal the European Institutions aim at helping to restore and further develop an important funding channel for the EU economy without jeopardising financial stability. The market for such products is primarily institutional (rather than retail) investors; the Commission’s proposal should also further enhance the role of non-bank long-term investors such as insurance companies or hedge funds.