Consultation: The case for a better functioning securitisation market in the European Union—AFME response

A recent Bank of England (BoE) and European Central Bank (ECB) discussion paper effectively sets out the principle benefits of and impediments to a well-functioning securitisation market, according to the Association for Financial Markets in Europe (AFME). In its response, AFME comments on a number of key issues raised, including the language used to describe qualifying securitisations, the central bank's transaction-based approach and the broadness of the term 'securitisation'.

For the paper see here: BoE and EBC paper

Summary

Background

On 30 May 2014, the BoE and ECB issued a discussion paper on the revitalisation of the European market for publicly distributed Asset Backed Securities. The paper outlined the reasons for the shortcomings and the opportunities for improvement of a market, which can complement other long-term wholesale funding sources for the real economy.

AFME response

Overall, the AFME and its members agree with the analysis presented, believing it effectively sets out the principal benefits of a well-functioning securitisation market and the principal impediments to the development of such a market. The broad features highlighted in the response include:

the language used to describe qualifying securitisations should be as neutral as possible

a positive evolution in the central banks' proposals for qualifying securitisations as compared to previous proposals is the central banks' transaction-based approach

the term 'securitisation' is a very broad term and the criteria suggested in the discussion paper do not always take full account of this

a key aspect of an effective regime for qualifying securitisations is there should be certainty surrounding the categorisation of each transaction

a further aspect of an effective regime for qualifying securitisations is that determinations should be timely

The AFME and its members also agree in broad terms that defining a sub-category of securitisations for differential treatment on the basis of transparency and predictability would be a helpful development.

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