MNI: EU To Push Securitisation In Fresh Capital Markets Drive
MNI (BRUSSELS) - Eurozone finance ministers expect the European Commission to come up with a proposal by April or earlier for regulatory changes to promote securitisation across the bloc, as they make a renewed push for their long-delayed Capital Markets Union project, European Union officials told MNI.
The ministers are decided to push ahead on CMU with new urgency, following a forceful call in talks on Monday by European Central Bank President Christine Lagarde, who argued that the EU must face up to the economic threat posed by the new U.S. administration of Donald Trump, they said.
Securitisation is seen as the easiest objective within CMU, which has been stalled for a decade, with regulatory action expected as soon as this year.
Capital Markets Union is central to the competitiveness challenge highlighted in the recent Draghi and Letta reports. Other big projects like Banking Union are unlikely to make headway in the current environment, with Germany still opposed to EU deposit insurance and Italy continuing to resist any change to the regulatory treatment of government bonds.
OVER-RELIANCE ON BANKS
Germany and the European Stability Mechanism are enthusiastic proponents of promoting securitisation, which would address the EU's traditionally excessive reliance on bank loans and its under use of market funding, while also freeing up capital from bank balance sheets.
But many close to the talks wonder if wider use of securitisation would do much to change the risk calculations of banks and other risk-averse EU savers and investors towards innovative start-ups, which generally lack collateral and stable income streams. They are keenly aware that many young start-up entrepreneurs leave the bloc in order to tap deeper and more liquid U.S. capital markets.
Some officials are beginning to argue that official guarantees for certain riskier tranches of investment or savings products, provided at either the national or at the EU level, would be needed in order to move towards an effective CMU. (See MNI: EU Ministers Want Private Funds To Boost Competitiveness)
Many EU states would lack fiscal space to provide such guarantees, and so would be likely to argue for an EU-level effort.
"That would still be a conversation to be had. These are likely to remain concerns," one source said.