14 May 2015

PensionsEurope responds to the EC consultation on an EU framework for simple, transparent and standardized securitization

PensionsEurope agrees with the European Central Bank and the Bank of England which note that “some securitizations may further provide long-term investors, such as pension funds, with a broader pool of assets that are genuinely low-risk from a credit perspective, alongside government bonds.”

First and foremost, PensionsEurope believes that a new EU securitization framework should be internationally consistent. Hence, PensionsEurope suggests to align any future EU legislative measure with the Basel Committee/IOSCO recommendations and to harmonize the regulatory definitions of securitizations typologies existing across the EU. The standardization of definitions, of information disclosure and of performance metrics across the EU could have a positive impact on the development of EU securitization markets, help ease investors’ analysis and increase the comparability of securitization instruments across the EU. The development of high quality securitization should not prevent however the development of other, non-standardized, securitized products.

Secondly, PensionsEurope is of the view that the harmonization of regulatory frameworks in the EU could enable a level-playing field for investors and issuers in European securitizations. For instance, the existence of different insolvency regimes in each Member State makes Europe-wide securitisation very difficult. A harmonization of tax treatments and bankruptcy law could be helpful, but PensionsEurope is well aware that it will be a long way to achieve a harmonization in the abovementioned policy areas.

Thirdly, it is important to increase the transparency of data and their availability for investors, especially considering the complexity of securitizations. For instance, for qualifying securitizations PensionsEurope considers that the European DataWarehouse is very helpful for investors. The reference to such data platforms should however not be made mandatory. It is crucial to remove existing barriers, such as the high due diligence costs for investors, in order to improve the attractiveness of the securitization market for pension funds.

Finally, PensionsEurope would like to stress that this and other Commission’s upcoming initiatives and policy measures should be aligned with the objective of creating a Capital Markets Union. In this context, PensionsEurope is very concerned that EIOPA’s work – fully on its own initiative – on the Holistic Balance Sheet approach (HBS approach) will discourage the participation of pension funds in this market and prevent from investing in long-term assets. The EU should definitely not copy the Solvency II framework to IORPs, while inadequately taking into account isolated characteristics of occupational pensions. The introduction of Solvency-II-style capital requirements would hamper sensible and desirable long-term investment by IORPs, rather than supporting it; and this would also negatively impact the potential of pension funds as investors in securitisations.

Full response

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