European true-sale securitisation market is broken
European true-sale securitisation market is broken
The true-sale securitisation market has been in the focus of policymakers
because of its larger market size. Indeed, preferential regulatory treatment has
been discussed for this segment first, which saw a fundamental reshaping after
the financial crisis.
In the run up to the crisis, outstanding European
true-sale securitisation grew exponentially, reaching USD 3 tr by 2009. The
lion’s share of the growth came from mortgage-backed securities that expanded
almost 20-fold from USD 111 bn in 2000 to USD 2.1 tr in 2009. Since then,
outstanding volumes of all securitised assets have tumbled to USD 1.5 tr. The
setback has hit on all fronts. MBS, which still form the largest market segment
by far, have fallen to USD 874 bn. Similarly, securitised assets backed by loans
to SMEs (SME-ABS) have declined to USD 112 bn, from USD 228 bn in 2009.
The decline of true-sale securitisation has significant implications for issuers and
the real economy.
Indeed, this type of securitisation is an additional funding
alternative for banks and, considering its market size, is crucial in enabling
further lending. The impact on bank funding is probably not so detrimental at the
moment, given central banks’ expansionary monetary policies (such as
TLTROs) and the resulting abundant liquidity in financial markets. Yet European
banks have been deleveraging since the crisis and remain hesitant to expand
their loan books.
The dwindling securitisation market has deprived them of an
option to extend commitments to clients without tying up scarce capital and thus
negatively impacts loan generation in Europe.
EU Forecast
euf:ba1.8i:159/nws-01