Policymakers now recognise the benefits of securitisation

Indeed, asset quality in the European securitisation market has been and
continues to be much more robust than in its US counterpart, as Europe lacks
explicit public guarantees (see section below). Taking this into account,
European policymakers now aim to establish a simple, transparent and
standardised (STS) securitisation market to restart high-quality securitisation in
Europe. This target has become one of the main pillars of the Capital Markets
Union project (see box 6). The STS framework could indeed help revitalise the
true-sale securitisation market, provided it comes with reasonable retention
rates for issuers and favourable regulatory treatment for investors.

However, it
will not automatically translate into enhanced lending across all loan segments.
For example, STS’s favourable measures will probably help the mortgage
market to take off, as loan portfolios are relatively standard and include
collateral. On the other hand, the STS framework will be very difficult to
implement in the SME loan segment, where loans are usually tailor-made and
not standardised. As discussed above, synthetic securitisation allows for much
more flexibility in underlying loans and thus helps banks to manage their capital
and credit risk more freely.

Hence, it may be a more suitable fit for loans to very
small companies, for loans to companies with differing legal forms, or for loans
with differing and non-traditional collateral attached (machines, private
guarantees, etc.). In this respect, this segment is even more relevant for
enhancing lending to corporations than for true-sale securitisation. Yet synthetic
securitisation has not been included in the STS framework so far.