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European authorities want banks to provide credit to small and medium sized enterprises through SME backed covered bonds. But they don’t need the funding; they need capital. They need securitization.
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Financial innovation deserves scepticism, especially unregulated investments offering retail investors supposed juicy returns. But while P2P lending merits scrutiny, it is both less useful, and less dangerous, than banking.
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There was muted celebration in the European ABS market this week as yet another rule making body began to row back from the punitive regulatory treatment imposed on the industry in the wake of the financial crisis.
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The omerta code works fine for a weekend in Sin City, but not for one of the US’s most important funding products. The securitization market must adapt to the spirit, not just the letter, of new transparency requirements — it is quickly running out of excuses not to do so. -
The US’s Federal Housing Finance Agency and the Federal Housing Administration are locked in yet another round of fisticuffs, with market share as the prize. If the private label RMBS market is to return, the government needs to stop hitting itself.
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Mention “Basel capital charges” to someone in the securitization business and prepare for a shudder — the industry has had to swallow new rules every year for three years, and costs could still cripple the market. But help could be at hand from another set of Basel rules.
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Securitization has come a long way in the past two years, not least in the minds of regulators. But the industry needs to start managing expectations. It is not going to solve Europe's problems on its own.
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Since making its decision to purchase asset backed securities, the policy message from the European Central Bank has floated somewhere between credit easing and quantitative easing. One won’t work, and the other should have nothing to do with ABS.
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The term 'sharing economy' might elicit groans from many corners of the banking industry, which have thrived for years on sharing as little as possible.
