Securitisation as tool to promote a sound bank d l
deleveraging
i
Jorge Marçal
g
ç • Economist
European Securitisation SWOT analysis
 “qualifying securitisation” (…) could aim to identify securitisations where
their simplicity structural robustness and transparency (…)
their simplicity, structural robustness and transparency
( )
BoE and ECB paper, May 2014  It should be simple (…), real (…) and transparent.
M. Draghi, ECB, June 2014
 (…) a regime of “qualifying securitisations” could be established for those
ABS that are simple, transparent and robust. Such securitisations could
benefit from a risk‐adapted
risk adapted regulatory framework (…)
( )
European Union Financial Service Committee
2 • 6 September 2014
European Securitisation SWOT analysis
Strengths
Weaknesses
 Offers a yield pick‐up in a low yield environment
 Expensive funding source for the originators
p
g
g
 Risk transfer away from the banking system
 Higher capital requirements for investors than other funding instruments issued by banks
 Banks’ balance sheet deleveraging
 Banks’ capital relief…?
 Good performance during the financial crisis
 Complex instrument in term of structuring and monitoring
 Higher transparency  Alignment of interests between originators and investors Opportunities
 Further integration toward pan‐European market
Further integration toward pan European market
 Long‐term investors seek investment opportunities
 Development of a High Quality Securitisation
Market
 ECB purchase program
Threats
 Regulatory uncertainty
Regulatory uncertainty
o HQLA definition o BCBS revision on securitisation framework
 Changes in rating agency methodologies
 Post‐crisis stigma
 Strong covered bonds market in Europe
 Higher EIB/EIF involvement after its capital increase
 Geographically fragmented market
 Harmonization: underlying asset => legislation
 Low credit growth prospects
3 • 6 September 2014
European Securitisation SWOT analysis
Possible topics for discussion include:
 What is the role for securitisation? Is low credit a cause or consequence of low
ABS issuance?
i
?
Will the resources created with securitisation be used to lend to the economy?
g system?
y
Is securitization a tool to enhance risk diversification outside the banking
How to attract funds from long-term investors?
How can regulation on “high quality securitisation” be shaped to be more friendly
to both sides,
sides originators and investors?
Is it consensual that the securitisation’s main strength is to free up capital from
the originators perspective, while from the investors’ view is the fact that its
securities pay a higher yield?
How to ensure that incentives are correctly aligned (release capital, while
requiring banks to maintain skin in the game and monitor properly)?
Can the ECB have a decisive role in the reigniting the ABS market?
Is a pan-European ABS market achievable in the future? In this vein, what can be
done to foster harmonization?
Which other tools may foster lending?
4 • 6 September 2014