Today, the economic and monetary affairs committee in the European Parliament struck an agreement on a package of measures that will regulate the securitisation market in Europe. Negotiations on the so-called STS (simple transparent and standardised) securitisation and the prudential requirements for credit institutions and investment firms (CRR) will now start with the EU Council ministers.
 
The European Parliament’s negotiator on the STS, S&D Euro MP Paul Tang, said:
 
“I am happy to see that there is a broad agreement that we need to have sound securitisation and we should at all costs avoid a repetition of the 2008 financial crisis. To this aim, we need sound products and a sound market in three ways: improved transparency, better supervision and stronger incentives. For example, we introduce more skin in the game, a ban on re-securitisation and strengthen the sanctions and fines in case of infractions.”
 
Under the proposed rules, the retention rate for issuers is increased to align their interests with that of investors. For low-powered vertical methods of retention, issuers should keep at least 10% of the assets on their balance sheet. For the adverse selection of assets, to repackage and sell them on through a securitisation, heavy fines will be imposed. On top of this supervisors are assigned powers to intervene in the market from both a macro-prudential and micro-prudential perspective. When market circumstances point at development of an asset bubble they can adjust the retention rate and risk floors upwards.

S&D Group negotiator on CCR, Jonás Fernández Álvarez, stressed:
 
“This compromise reflects well the position of our group during negotiations in order to revitalize the safe securitisation in the European market, providing more liquidity to the real economy and at the same time reinforcing the financial stability.”
 

S&D Group spokesperson for the economic and monetary affairs Pervenche Berès stated:
 
“Securitisation can be a tool to widen access to funding for businesses. The European economy will be able to optimize financing conditions, but we need clear prudential rules, transparency and supervision. We will do our utmost to introduce the compromise we have achieved at committee level in the negotiations with the Council into the legislation.”