ECB González-Páramo: Revival of securitisation markets is needed in many countries to support the provision of credit to the real economy
16 June 2010
Speaking at the AFME/ESF conference, González-Páramo said that in order to have a revival of the ABS market there is a need to increase transparency, standardisation and product simplicity. It is that area where the industry has to step up its efforts in order to restore confidence in the market.
Speaking at the AFME/ESF and Information Management Network Global ABS 2010 Conference in London ECB González-Páramo said that:
· Securitisation managed in good order, should bea welfare-improving tool, because value is created by secured funding that is correctly structured and allows to adequately distribute financing and funding, and the related risks among households, enterprises, banks and investors. When it works properly, securitisation may represent a significant step towards more complete credit markets, thereby contributing to enhancing the efficiency of the economic system. The revival of securitisation markets is needed in many countries to support the provision of credit to the real economy, particularly to households and small business.
· While it is essential to define new market standards in terms of simplicity and transparency, more actions may be needed to re-start the securitisation market. There does not seem to be one single and simple solution that can unlock the securitisation market. This is natural since structured finance is a combination of manifold features such as different asset types, a variety of interest rate products with diverse maturity profiles and structures, and a variety of legal regimes and market arrangements. Thus, restoring the securitisation markets requires a combination of initiatives, both from the private and the public sector.
· The Eurosystem is contributing, first of all, by accepting structured finance assets as collateral. This proved and still proves a great support to this market segment during the crisis, as it helped and continues to help to avoid a sudden and disruptive unavailability of funding to originators of ABS. Second, as mentioned earlier, by introducing a loan level data requirement to our set of eligibility criteria, we may contribute to increasing the disclosure standards for the market at large. However, more needs to be done, as many of those required steps, for example enhancing secondary market liquidity, go beyond the scope for direct action by the Eurosystem.
· Looking ahead, a self-sustained revival of the ABS market requires fundamental changes. It is high time to raise to the challenges of transparency, standardisation and product simplicity. This is where the industry has to step up its efforts in order to help decisively in restoring confidence in the securitisation markets.
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