The development of a simple, transparent and standardised (STS) securitisation market is a key building block of the European Commission’s capital markets union (CMU). AFME is a committed supporter of the CMU project and STS within it.

Commenting on the securitisation proposals, as part of today’s announcement, Simon Lewis, Chief Executive of AFME, said:

“The Commission’s proposals represent a significant step forward in restarting securitisation in Europe. There is much to welcome, in particular positive adjustments to the Basel capital hierarchy, a wider framework for short-term securitisations and better treatment for securitisation swaps. We recommend EU legislators to move forward as soon as possible on the new calibrations for Solvency II and liquidity regulation, and resolve remaining areas of uncertainty and complexity.”

We also welcome:

• The recognition of the strong credit performance of European securitisation before, during and after the crisis.
• The proposed adjustment to the Basel hierarchy enabling banks to use the Standard Approach where the External Ratings Based Approach produces a result “not commensurate to the credit risk”, and other improvements to regulatory capital treatment.
• Harmonisation of the current fragmented due diligence and risk retention regime across different investor types.
• Enabling investors to place “appropriate reliance” on the STS notification undertaken by originators, sponsors and SSPEs.
• Technical adjustments to some of the detailed STS criteria which broaden scope and incorporate existing prudent market practices.

Richard Hopkin, Head of Fixed Income, AFME said:

“The Commission’s proposals deliver a strong start to the legislative process, but of course they can only be part of the answer to reviving European securitisation. AFME stands ready to work with the Commission, Member States and MEPs so that a rebuilt securitisation market can once again help deliver stronger, deeper capital markets and funding for Europe’s small businesses, homeowners and consumers.”

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