Europe's securitisation market has failed to stage a strong recovery since the financial crisis, despite the credit performance of most asset-backed securities in Europe over the past few years, and the resilience of secondary prices.
Bankers have blamed regulators, who fail to appreciate the value of the market to help refinance economies and have not allowed banks to count asset-backed securities towards their liquidity ratios. This is a major constraint, given that banks have been the main buyers of these assets in Europe. New issues of European securitised deals have been virtually static, rising just 4 per cent to $63.7 billion in the year to September 2, despite the credit quality of European securitised products proving to be stronger than the US equivalents.
Scott Dickens, global head of structured capital markets at HSBC, said: “The big game-changer in Europe would be if regulators allowed a stringently-defined set of assets or asset-backed transactions to count towards banks’ liquidity ratios. That would make it feasible and economically attractive for banks to purchase high-quality ABS as a credit product and also as a liquidity product.”
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