Securitisation – Reformed And Good For Banks

Nobody would have said so in 2008 or 2009. Many are still sceptical now. However, the European Commission's action plan for a "Capital Markets Union" has made the revival of securitisation a key objective. Why? In the Commission's words: "to help diversify funding sources and unlock capital, making it easier for credit institutions (banks) to lend to households and businesses".

The Commission has recently published two new draft laws, the Draft Securitisation Regulation and the Draft Capital Requirements Regulation, to refine the concept of risk retention and create a market standard of transparent and comparable securitisations. It is hoped that they will help remove some of the stigma attached to securitisation. The benefit for banks of the new regime, whether acting as originator or investor in securitisations, will be a more risk-sensitive regulatory capital approach.