The European Commission has proposed easing the EU’s strict securitisation rules for banks to encourage lending and support economic growth. This move aims to revitalise the underdeveloped securitisation market while maintaining financial stability. The proposal is part of a broader initiative to integrate the EU’s capital markets, providing more financing options for businesses to compete globally.
Securitisation allows banks to package loans and sell them as securities to investors, freeing up capital for new loans. Although the Commission acknowledges the need for equity financing, particularly for small enterprises, specific solutions are yet to be introduced. The revised framework seeks to balance risk management with market efficiency, reducing excessive restrictions implemented after the 2007 financial crisis.
Among the changes, investors will face less stringent due diligence requirements, and private deals will have reduced paperwork and transparency obligations compared to public transactions. While the potential impact on bank capital and lending remains uncertain, the Commission highlights the growth potential of the EU’s securitisation market, currently valued at 1.6 trillion euros, compared to $14 trillion in the U.S.
— new from Reuters