LONDON May 31 The European Union has agreed on
new rules to revive the securitised debt market, which was
tarnished by the financial crisis, as part of a drive to build a
deeper European capital market, EU officials and lawmakers said
The bloc agreed a deal on "simple, transparent and
standardised" (STS) forms of securitisation - assets like home
loans bundled into tradable securities that can be sold to
retail investors to raise funds that can be lent to companies.
Banks would be encouraged to offer these forms of
securitised debt because they would not have to hold so much
capital against them.
Europe's securitisation sector shrank after securitised debt
based on poor quality U.S. home loans turned toxic in 2007,
sowing the seeds of the global financial crisis.
The new rules are stricter on the quality of assets that can
be securitised, and introduce tougher scrutiny by regulators.
"This is a cornerstone proposal in our attempt to build a
financial system that improves financing of the real economy,"
European Commission Vice President Valdis Dombrovskis told a
news conference in Brussels.
The Commission first proposed the new rules in September
2015, but they became bogged down in arguments over whether a
market that burned investors and forced taxpayers to bail out
banks should be revived.
"This shows we are able to learn lessons from the economic
crisis and move closer to our objective of creating a capital
markets union," said Othmar Karas, an Austrian centre-right
member of the European Parliament.
"Our aim was try to breathe new life into that market and
not to abolish securitisation. We have changed poison into
An impasse was broken when a deal emerged on Tuesday evening
between EU states and the European Parliament. The STS rules
come into effect in July 2018.
"While important details remain to be finalised, we are
confident that the long-term impact of the STS framework will be
positive," Simon Lewis, chief executive of the Association for
Financial Markets in Europe, a banking industry body, said.
The EU's drive for a capital markets union (CMU) got another
boost on Tuesday evening when a proposal to make it easier for
venture capital funds to invest in EU start-ups was also agreed.
The Commission originally envisaged the CMU as a way to
diversify sources of funding and eliminate cross-border barriers
to investment, unlocking capital that could be channelled to
companies and infrastructure projects to spur growth.
The expected departure from the EU of Britain, the bloc's
biggest financial market, in 2019 is forcing the Commission to
rethink its CMU project as an alternative to the City of London.
Dombrovskis is due to announce a raft of new measures on
June 8 to relaunch a "CMU 2.0".
(Reporting by Huw Jones; Editing by Adrian Croft)