Monday

16th Sep 2019

Use of securitised financial products grows without EU help

  • Securitisation helped cause the 2008 financial crisis, but the EU says it is essentially a safe product that can help SMEs (Photo: Universiteitskrant Univers)

Securitisation, a controversial financial product which the EU wants to endorse, has become more popular in 2016, despite new EU rules not having been agreed yet.

According to new figures, the European financial services industry issued €237.6 billion in securitised product last year, the highest figure since 2012, putting into doubt the need for proposed EU legislation.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

Securitisation is the packaging of loans, mortgages, or other contractual debts into securities that can then be sold on the market, together with the risk attached to those debts. The complex financial tools helped bring about the 2008 financial crisis in the United States.

The European Commission wants to “revitalise” the securitisation market and release it from its “stigma”.

While the Commission has not set a specific target to achieve, its communication department usually speaks about getting securitisation back to the “pre-crisis average”.

But according to data released on Friday (27 January) by the Association for Financial Markets in Europe (AFME), a lobby group for the financial service sector, issuance of securitisation is now higher than pre-crisis average for three years in a row.

(Photo: EUobserver)

Securitisation in Europe

Nevertheless, the EU commission still wants to introduce criteria for a new class of securitisation, which will receive the label “simple, transparent and standardised”.

It proposed a legislative text in September 2015. The Council, where national governments meet, and the European Parliament have reached their respective views on the text and now need to negotiate a compromise.

The two sides have had one meeting so far, last week in Strasbourg, with the next two rounds of negotiations scheduled for 7 February and 7 March, according to an EU source.

The responsible EU commissioner, Valdis Dombrovskis, said on Thursday (26 January) that he is “counting on the European Parliament and Council to reach swift agreement” on the file.

“There is broad international consensus that straightforward securitisations have a positive role to play in a modern economy,” he said.

The idea is that more securitisation will lead to banks having more capital available to lend to small- and medium-sized enterprises (SMEs), but empirical evidence for that expectation is scarce.

Barclays Bank told the commission, ahead of the unveiling of the plan, “it is unlikely that identifying new investors through securitisation would create significant increased lending to the SME market.”

In an interview last month, lobby group AFME said securitisation may not solve all problems, but can help.

“It should not be banned or treated as toxic waste,” said Anna Bak, a manager at the securitisation division of AFME.

She also pointed out that looking at the creation of securities is not enough, they also need to be sold.

“The commission's securitisation proposal will be a success when we see a trend towards more securities being placed on the market in Europe,” Bak told EUobserver.

AFME's figures on Friday showed that in 2016 only 35 percent of created securities had been sold.

However, with €96.4 billion in securitised product placed on the market, it did reach the highest figure since 2008.

This article was updated on 27 January 2017, 17:49, to include the paragraph about scheduled negotiations

Interview

MEPs wary of small print in EU securitisation bill

Paul Tang, the Dutch economist and MEP shepherding through the EU's securitisation bill, casts doubt on claims the risky sector can bring EU states an extra €100 billion.

EU wants to fast-track the capital markets union

The European Commission says that Brexit and the loss of the City of London, the EU's main place for finance, is a reason to accelerate the integration of the bloc's financial markets.

News in Brief

  1. Nearly 100 refugees evacuated from Libya to Italy
  2. Juncker to meet Johnson on Monday
  3. First Hungary 'Article 7' hearing set for Monday
  4. Vestager picks Danish EU ambassador as cabinet head
  5. Commissioner hearings will start 30 September
  6. Italy says EU countries agree to take in rescued migrants
  7. Germany to organise Libya conference on arms embargo
  8. European Parliament to support another Brexit delay

Opinion

Why von der Leyen must put rights at core of business

Ursula von der Leyen's in-tray must include those European executives on trial for systematic workplace harassment, the break-up of European slavery rings, and allegations of European companies' abuse in palm oil, including child labour, land grabs, and deforestation.

Stakeholders' Highlights

  1. Nordic Council of MinistersNew programme studies infectious diseases and antibiotic resistance
  2. UNESDAUNESDA reduces added sugars 11.9% between 2015-2017
  3. International Partnership for Human RightsEU-Uzbekistan Human Rights Dialogue: EU to raise key fundamental rights issues
  4. Nordic Council of MinistersNo evidence that social media are harmful to young people
  5. Nordic Council of MinistersCanada to host the joint Nordic cultural initiative 2021
  6. Vote for the EU Sutainable Energy AwardsCast your vote for your favourite EUSEW Award finalist. You choose the winner of 2019 Citizen’s Award.
  7. Nordic Council of MinistersEducation gets refugees into work
  8. Counter BalanceSign the petition to help reform the EU’s Bank
  9. UNICEFChild rights organisations encourage candidates for EU elections to become Child Rights Champions
  10. UNESDAUNESDA Outlines 2019-2024 Aspirations: Sustainability, Responsibility, Competitiveness
  11. Counter BalanceRecord citizens’ input to EU bank’s consultation calls on EIB to abandon fossil fuels
  12. International Partnership for Human RightsAnnual EU-Turkmenistan Human Rights Dialogue takes place in Ashgabat

Latest News

  1. Brexit and new commission in focus This WEEK
  2. As recession looms Europe needs more spending
  3. How should the EU handle Russia now?
  4. EU defence bravado criticised by auditors
  5. Central European leaders demand EU Balkan accession
  6. Luxembourg's cannabis legalisation is EU opportunity
  7. The Catalan National Day has been a success. Why?
  8. Why I'm voting against the von der Leyen commission

Stakeholders' Highlights

  1. Nordic Council of MinistersNew campaign: spot, capture and share Traces of North
  2. Nordic Council of MinistersLeading Nordic candidates go head-to-head in EU election debate
  3. Nordic Council of MinistersNew Secretary General: Nordic co-operation must benefit everybody
  4. Platform for Peace and JusticeMEP Kati Piri: “Our red line on Turkey has been crossed”
  5. UNICEF2018 deadliest year yet for children in Syria as war enters 9th year
  6. Nordic Council of MinistersNordic commitment to driving global gender equality
  7. International Partnership for Human RightsMeet your defender: Rasul Jafarov leading human rights defender from Azerbaijan
  8. UNICEFUNICEF Hosts MEPs in Jordan Ahead of Brussels Conference on the Future of Syria
  9. Nordic Council of MinistersNordic talks on parental leave at the UN
  10. International Partnership for Human RightsTrial of Chechen prisoner of conscience and human rights activist Oyub Titiev continues.
  11. Nordic Council of MinistersNordic food policy inspires India to be a sustainable superpower
  12. Nordic Council of MinistersMilestone for Nordic-Baltic e-ID

Join EUobserver

Support quality EU news

Join us