Press Release: LMA responds to the ECB and the Bank of England consultation for a better functioning securitisation market

Original news:

A joint discussion paper from the Bank of England (BoE) and the European Central Bank (ECB), on the revitalisation of the European market for publicly distributed Asset Backed Securities (ABS), was published in May this year, outlining 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.  Both institutions welcomed comments and views on the paper by 4 July 2014.

 Response to the paper by the Loan Market Association

In its response to the discussion paper from the Central Banks this month, the LMA raised three key points which it believes should be observed when considering reform of the securitisation market.

The LMA said:

1) open market CLOs are not an easy fit with the definition of securitisation which can result in disproportionate and unintended consequences for the industry

2) regulation of the CLO market has resulted in reduced loan market liquidity

3) the CLO market, if well-functioning and under less onerous regulatory constraints, can bring unique benefits as a source of liquidity and supply 'much-needed credit into loan markets'

Summary

In its response to the discussion paper from the Central Banks, the LMA raised three key points which it believes should be observed when considering reform of the securitisation market.

The LMA said:

open market CLOs are not an easy fit with the definition of securitisation which can result in disproportionate and unintended consequences for the industry

regulation of the CLO market has resulted in reduced loan market liquidity

the CLO market, if well-functioning and under less onerous regulatory constraints, can bring unique benefits as a source of liquidity and supply 'much-needed credit into loan markets.'

 

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