The European Securitisation Market

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Introduction

  • Well-designed securitisation provides an effective tool for banks to free up their balance sheets and release capital. It is therefore an effective tool to redeploy capital and support firms and businesses in their activities while helping them to build resiliency to economic downturns and facilitate their transition to a sustainable and digital economy.
  • In 2008 the size of European securitisation was approximately 75% of the US, which is the biggest securitisation market worldwide, whilst in 2021 the European market declined to approximately 5% of the US market. Furthermore, Europe is lacking behind other emerging economies, such as China and South American countries, in terms of growth of the securitisation market.
  • The reasons for the gap could lie in multiple causes, from the variety of legal frameworks applicable across European countries to the securitisation operations. Transactions covering assets originated in different states suffer from greater complexity and costs. Also, as part of the post-crisis measure package, Europe may have adopted more strict accounting and prudential rules than its peers.
  • The implementation of the Europe framework for Simple, Transparent and Standardised Securitisation (STS) and the EU Regulations defining capital requirements could help to support the growth of the European securitisation market. However, the market needs a minimum harmonisation of national insolvency laws, including collateral enforcement, to provide equal safeguards and predictability of outcomes to investors. Furthermore, improving the quality and comparability of data of the securitised assets is important to facilitate cross-border transactions.

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THE EUROPEAN SECURITISATION MARKET

27 Oct 2022

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