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Q&A: Richard Hopkin says ABS must deliver

By Tom Porter
11 Jun 2014

Richard Hopkin, managing director at the Association for Financial Markets in Europe, caught up with GlobalCapital to talk about ABS market optimism, the work still to be done and why on earth he couldn't see a taxi strike coming.

GlobalCapital: Has increased optimism about the market’s future been tangible this week?

Richard Hopkin, managing director, AFME: When a member of the executive board of the ECB is willing firstly to come to your industry event, and secondly to give a very balanced, fair, and yet very positive speech about the importance of securitization in getting European growth back, that is definitely a big morale boost for everyone in the market.

At the same time everyone acknowledges that there is more work to do, and as we heard from Fabrice Susini yesterday, the pressure is really on now. Yes we have taken a lot of steps to reform and fix shortcomings of the past, but the pace of that change can only intensify now going forward. A lot of important people are now supporting us. The onus is on us now to deliver.

GlobalCapital: Anecdotally it seems there are fewer regulators and more investors here this year, does that show more buyers are coming back?

Hopkin: There are plenty of investors who are willing to come to the market but who are put off from actually jumping into the water for now, because of the uncertain direction of some of the big regulatory initiatives. The Liquidity Coverage Ratio may be the first one that we hear about. If there is a positive outcome on the LCR that will help enormously.  The LCR, Solvency II and the Basel rules are almost existential in their impact on the market, and once we get clarity on those there are investors who will be willing to come back in.

GlobalCapital: What more can actively be done to drive the rebuilding of the market forward at a quicker pace?

Hopkin: We are getting on with it. There are several different dialogues going on, the work is certainly not slowing down at all. What we are seeing is a change from a defensive reaction to harsh regulation to a more positive engagement with regulators in terms of how we can get things right.

Launching PCS (the Prime Collateralised Securities label) as the first step in the rehabilitation of European market two years ago was absolutely the right decision. That has helped keep us in the discussion with regulators and shown that we are serious about bringing this market back in a sustainable and reformed way.

GlobalCapital: What would you like to be achieved by Global ABS next year?

Hopkin: I would like to see the inclusion of a wider range of ABS in the LCR, to include autos, cards, consumer and SME loans. We may have an answer on that in the next few weeks. I would like to see a balanced approach under the Basel RWA rules. Broadly speaking we need something that recognises the strong performance of European securitization and that the product is competitive with taking the same risk by investing directly or investing through a covered bond.

On Solvency II, whilst we all appreciate the weightings have come down several times, they are still not quite at a level to get the insurance companies back. Getting the insurers and non-bank investors back to this market is absolutely crucial. Getting risk outside the banking system was what didn’t happen before.

GlobalCapital: Is the sun shining on ABS again now we are back in Barcelona?

Hopkin: The sun is certainly shining outside. The reason we decided to come back was there are a relatively limited number of places in Europe that can host a conference of this size, close to a city centre and with all the other facilities that delegates need to have. We were also able to sit down for lunch, which we couldn’t do in previous years. It’s a shame about the taxi strike but you can’t get everything right.

By Tom Porter
11 Jun 2014