The impaired EU securitisation market: causes, roadblocks and how to deal with them

Joint paper by the ECB and the Bank of England.

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 2014. A longer, more substantive joint discussion paper was due to be published in May 2014.

ESO: Background information: Recent developments in securitisation http://www.europeansources.info/record/recent-developments-in-securitisation/

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