The Association for Financial Markets in Europe (AFME) has published a comprehensive position paper outlining a five-point plan aimed at revitalising the EU securitisation market. The paper highlights the importance of securitisation in supporting EU growth, addressing regulatory challenges, and maintaining safeguards against high-leverage products, manifested in five key measures:
From a Nordic perspective, these measures are particularly relevant as they can help address the systemic risk concerns and the financing challenges faced by businesses and households in the region. The Nordic financial markets, known for their stability and innovation, could benefit significantly from a revitalized securitisation framework that aligns with AFME's recommendations.
Revel Partners expresses strong support for AFME's conclusions. Revel Partners acknowledges the critical role that securitisation plays in providing capital. liquidity and funding across Europe. We believe that the proposed reforms will significantly boost market confidence, enhance credit availability, and support broader economic growth. Revel Partners sees securitisation as a vital tool for channeling investment into key sectors, thereby helping to meet future funding needs and driving sustainable economic development. However, we raise some concerns about one of the proposed measures—Track 4—which would allow banks to count securitisations towards their High-Quality Liquid Assets (HQLA) under the Liquidity CoverageRatio (LCR) requirements.
Revel Partners argues that while this measure could increase demand for securitisations, it might also introduce significant systemic risks. More specifically, such reforms should maintain existing safeguards to prevent the proliferation of high-leverage products, reminiscent of those that contributed to the Global Financial Crisis. By implementing thesea djustments, the EU can harness the full potential of securitisation to support economic growth while maintaining financial stability.
In the broader context of systemic risk, however, the initiative is seen as a strategic move to restore investor confidence and encourage the flow of capital to sectors that need it most, thereby fostering economic growth and financial stability across the EU, including the Nordic countries.
For more details, you can access the full report on AFME's website.
