Post-issuance reporting in the securitization market has improved over the past five years but further disclosure is required if the secondary market is to mature. "With the large number of new investors in the securitization market and the fact securitization is now larger than other parts of the credit markets at €1.1 trillion, it is more important than ever to know a deal in the secondary market is meeting the standards set on day one," said Shami Malek, London-based managing director at Standard & Poor's.
Malek said it is particularly important to improve reporting now given market conditions. "It's precisely in this kind of credit environment---where spreads are at historical tights and credit conditions are benign---that the worst investment decisions are actually made," he warned.
Until now, issuers have made information available only to investors who have bought the deal and the deal's underwriters--but not to the market at large. Holly Hammarstrom, head of ABS research at European Credit Management in London noted, "It hinders the investment decision from ECM's perspective if ongoing reports are not broadly available to all market makers."
To improve reporting, the introduction of regulatory requirements is what will pave the way forward. The U.S. Securities and Exchange Commission leads European regulators on this front but players expect this to help accelerate disclosure in Europe. European investors buying U.S. deals are getting used to the level of reporting across the Atlantic and are more likely to demand it at home as well, commented another market official.
While no regulation of the SEC variety is in the works yet in Europe, the European prospectus directive--which is due to be implemented shortly---does include an annex stipulating issuers must state whether they will make reports and if so, what they will report, how often and where the report can be obtained.