October 25, 2017

EC published opening remarks of Vice President Valdis Dombrovskis at the European Parliament’s (EP) Plenary debate on simple, transparent, and standardized (STS) securitization. He highlighted that the securitization was one of the first proposals put forward as part of the Capital Markets Union in 2015. He then moved on to discuss the benefits of STS securitization toward revitalizing the European markets, along with the specific criteria to facilitate this.

“After two years of discussions, I am happy to say that the final result is both balanced and ambitious,” said Mr. Dombrovskis. He also briefly explained the criteria of simple, transparent (ESMA-supervised data repository to ensure the transparency of STS securitizations), and standardized. As per the EC Vice President, the proposals contain appropriate safeguards. The issuers would need to retain at least 5% of the securitized asset, to ensure that their incentives are aligned with those of the investors. Also, underlying assets would need to be credit-worthy according to the existing EU rules.  New capital requirement rules are also being introduced for the banks that invest in securitization, to promote a stable and resilient banking sector. These requirements build on global standards and will fully reflect the lower risks associated with STS securitisation.

He concludes, “We have done important work to agree on the final text…. Let us now conclude this important chapter in the building of the Capital Markets Union, so the benefits to businesses and households can be quickly realized.”

 

Related Link: Opening Remarks of EC Vice President

Keywords: Europe, EU, Banking, Securities, STS Securitization, Capital Markets Union, EC

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