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Capital Markets

Regulation: EC lays down the law on securitization

The European Commission demands a comprehensive action plan to right the wrongs by the end of January.

Although many participants in the European securitization market had already drawn a line under a terrible year by early December, those at the European Securitization Forum faced the prospect of Christmas being cancelled altogether. News emerged in early December that a delegation from the European securitization industry’s trade body had been summoned to speak with EU director of financial services David Wright during the first week of December and tasked with coming up with an action plan to tackle the industry’s problems – by the end of January.

This marks an upping of the ante between the European Commission and the ESF. Wright was the keynote speaker at the ESF’s recent symposium on European Securitization Markets, where he said that the EC would prefer to see a market-led solution but urgently needed to see a plan to address questions by regulators on transparency and securitization valuations. Clearly, when he said urgently, he meant urgently.

At the November 19 symposium, Wright also warned that the EC would be "pushed by the political community to intervene in these areas" if the market failed to move swiftly. This is interpreted as suggesting that the EU will move to ban certain types of investor from buying European ABS unless the industry cleans up its act with regard to transparency and valuation.

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