In a recent article published by GlobalCapital, a significant report from Risk Control has been highlighted, aiming to reshape the debate surrounding the EU Securitization Regulations (EUSR) as the industry approaches a critical juncture. The report, titled "European Competitiveness and Securitisation Regulations," emphasizes the economic benefits of securitization and suggests crucial regulatory reforms to enhance the efficiency and impact of this financial tool.
GlobalCapital's article underscores that the report arrives at a critical time, with forthcoming regulatory updates from key EU bodies, including a highly anticipated report from ex-ECB President Mario Draghi on how to enhance EU competitiveness. The Risk Control report advocates for moderate but impactful adjustments to existing regulations, particularly focusing on "capital velocity," a concept that would allow banks to recycle capital more efficiently through securitization, thereby increasing lending capacity and supporting economic growth.
Revel Partners, a leading Nordic advisory firm, has recently explicitly stated their strong support for the Risk Control report referenced in the GlobalCapital article. In their statement, Revel Partners elaborated on the specific implications for the Nordic region, noting that the proposed regulatory adjustments could have a particularly positive impact on Nordic financial markets. Jonas Bäcklund, CEO of Revel Partners, is prominently featured in the GlobalCapital article, where he discusses the growing interest in securitization within the EU, noting that "securitization is the new black." He emphasizes that this area allows regulators to "take concrete actions to promote new lending and support the economy without, in theory at least, increasing systemic risks."
Bäcklund further comments on the broader context of regulatory reform in the GlobalCapital article, stating that the idea of reforming securitization for economic benefit is "perhaps not a novel concept, but it’s very, very helpful." He highlights the potential for these reforms to unlock significant benefits, particularly for regions like the Nordics, where financial markets are well-developed and could stand to gain from increased securitization activity.
The GlobalCapital article also explores how the Risk Control report suggests adjustments to risk weight floors—regulatory measures that dictate the minimum capital banks must hold against securitized assets—could significantly boost securitization volumes, particularly in residential mortgages. Revel Partners echoed these sentiments, pointing out the potential for increased securitization activity in the Nordics, which could free up capital for more productive uses and contribute to sustained economic development in the region.
Additionally, in the GlobalCapital article, Bäcklund touches on the rise of private credit, which has grown as banks face lending constraints due to difficulties in recycling capital through securitization. He notes that "all the growth in the last decade has been picked up from the private credit/shadow banking side," a development he describes as "a challenge from a supervisory perspective." Bäcklund suggests that this trend may be driving renewed regulatory interest in securitization as a more transparent and controllable alternative, a view strongly supported by Revel Partners in their recent endorsement of the Risk Control report.
As the EU prepares for a crucial period of discussion on the future of the EUSR, Revel Partners’ endorsement, coupled with the insights shared in GlobalCapital's coverage of the Risk Control report, including all key contributions from Bäcklund, are likely to play a key role in shaping the direction of securitization reform in Europe, with significant implications for the Nordic financial landscape.
The article in GlobalCapital can be found here, behind paywall.
