The EU Financial Market Commissioner Maria Luís Albuquerque recently presented a proposal for the reform of the European securitization market. This reform aims to loosen the securitization rules to promote lending to the economy and allow for broader risk diversification. Securitization is a financial instrument that allows loans or other assets to be converted into tradable securities. This can help banks provide additional loans while also spreading the risk.
Background and Objectives of the Reform
The reform aims to relax the excessively stringent securitization rules that were introduced after the 2008 financial crisis. These rules were designed to minimize the risk of securitizations but have also restricted lending. The European Commission hopes that by relaxing these rules, it can foster lending and improve financial stability.
Impact on Investors and Savers
The proposed changes could have both positive and negative impacts on investors and savers:
- Positive Impacts: Loosening the securitization rules could lead to a greater selection of investment opportunities, as more loans would be available. This could be particularly interesting for investors looking for safe investments that also offer a degree of return.
- Negative Impacts: Loosening the rules could also increase risk, as less stringent requirements may be placed on the quality of the securitized assets. This could lead to greater uncertainty for investors who rely on stable investments.
Reactions from Banks
The banking association welcomed the easing of due diligence requirements but is dissatisfied with the adjustments to capital requirements. Banks fear that the planned changes may not be sufficient to significantly increase lending.
Conclusion
The proposed reform of the securitization rules in the EU could impact both lending and financial stability. While it could potentially create more investment opportunities, it also carries the risk of increased uncertainty for investors. Bank reactions indicate that further adjustments may be needed to fully achieve the goals of the reform.