Interview with Markus Ferber: Remarks on the EU's Securitization Draft Proposal
"Impracticality Prevails in This Matter"
In the EU, the long-awaited legislative package seeking to revitalize securitization markets is finally here. However, MEP Markus Ferber, a key figure in economic and financial lawmaking, isn't impressed with the draft now on the table.
Markus, what's your take on the EU Commission's draft for revamping securitization regulations?
I'm disheartened with the draft. To begin with, the European securitization market is comparatively undeveloped. The 2017 attempt to boost it by introducing the STS classification failed, and the market even suffered a setback. Sadly, the EU Commission's latest proposal doesn't seem like a game-changer.
What exactly do you find problematic about the draft?
The draft places far too many requirements on market participants, making life much harder for issuers and investors. The EU Commission is also fashioning an entirely new taxonomy for securitization, making matters even more complex and cumbersome.
Isn't the EU Commission also attempting to make things easier, as with the introduction of "resilient" securitizations that need less capital cushioning?
Initiatives like the introduction of resilient securitizations contribute to the complexity instead. Moreover, the criteria for them are extremely narrow, making them practically impractical.
Has reviving the securitization market a significant role in the broader objective of the savings and investment union?
While revitalizing the securitization market could have some significance for specific market segments like leasing, it is not the big step towards a savings and investment union or a deeperEuropean capital market.
Do you believe the legislative amendment will aid the EU to catch up to the US in terms of securitizations?
Absolutely not. Even if the current draft from the EU Commission were to be adopted without modification by the Council and Parliament, I don't expect Europe to catch up with the United States. Given the lingering resentment towards securitizations by certain factions in the EU Parliament, who hold securitizations partly responsible for the financial crisis 15 years ago, there will likely be many reservations. This could result in a poorly managed rather than a boosted securitization market.
The interview was conducted by Detlef Fechtner.
Additional Insights
- Markus Ferber, a CSU MEP, argues that the new draft rules do not go far enough in relaxing existing restrictions, claiming that Europe’s securitization market remains overregulated compared to other major markets.
- He also criticizes the piecemeal approach to reform, the narrow focus on banks, and the complexity and layering of additional regulations without removing outdated rules.
- Failure to address these issues may hinder the development of a vibrant securitization market in Europe, limit investment choice, fragment the internal market, reduce market liquidity, and drive investors towards non-EU markets.
Markus Ferber, a CSU MEP, argues that the new draft rules do not go far enough in relaxing existing restrictions, suggesting that the European securitization market remains overregulated compared to other major industries and finance markets. He also criticizes the piecemeal approach to reform, the narrow focus on banks, and the complexity and layering of additional regulations without removing outdated business rules.
Failure to address these issues could limit the development of a vibrant securitization market in Europe, fragment the internal market, reduce market liquidity, and drive investors towards non-EU business sectors.
