Last night, the European Parliament and the Council struck a political agreement on new rules on securitisation in Europe, in order to develop a stable market and facilitate access to financing for businesses with the aim of boosting private and public investment in Europe.
The EU agreed on criteria for simple, transparent and standardised securitisation (STS) and Capital Requirements Regulation (CRR), a key building block of the Capital Markets Union (CMU).
The European Parliament’s negotiator, S&D Euro MP Paul Tang, said:
“The negotiations have been tough. It was not a walk in the park. Nevertheless, we reached a good compromise, which bears the fingerprints of the European Parliament. We had concerns about the original proposal from the Council, but we fought very hard to strengthen the prudential framework to ensure an efficient oversight of this market at the European level.
“In particular, the European Systemic Risk Board (ESRB) based in Frankfurt will have responsibility for monitoring the risks on the markets. It will be able to make recommendations including on the need to raise the risk retention level which protects against misbehaviour by market participants and market overheating.
“Furthermore, the Commission will analyse the risk retention methods used by issuers and review the regulation in three years if necessary to ensure appropriate levels. Moreover, the European Securities and Market Authority (ESMA) based in Paris will be able to make decisions in case of disagreements between different national authorities.
“On transparency, we achieved the creation of data repositories, authorised and supervised by the ESMA. This increased transparency in the market is a key feature to protect investors and ensure that the supervisor can efficiently control the market. In addition we also succeeded in introducing environmental characteristics for houses (energy labels), cars (CO2 emissions) and for loan data which allows investors to invest in green portfolios.
“Finally, we requested the banning of re-securitisation which was at the heart of the 2008 sub-prime crisis in the US. As an outcome of the negotiation, re-securitisation will now only be authorised in very limited and most legitimate forms.”
S&D negotiator for the revision of the capital requirement directive, Jonás Fernández Alvarez MEP, added:
“The Parliament obtained a great victory changing the initial position of the Council and Commission on the hierarchy of methods, by introducing a new order to calculate the risk weights for the capital requirements to be applied to a securitisation issuance.
“As a result, credit-rating agencies will only be used in very specific cases in order to measure securities risks.
“This text represents a balanced result that allows Euro MPs to hold the supervisors accountable for the stability of the market at all times.”
MEPs involved
