EU Securitisation Market: AFME Updates
The Association for Financial Markets in Europe (AFME) has released data showing that Europe is falling behind the US and Asia in terms of securitisation market growth. In the 15 years leading up to 2022, Europe's (EU + UK) annual securitisation issuance experienced slow growth, with EU issuance accounting for only 0.3% of EU GDP and UK issuance for 0.9% of UK GDP in 2022. This is in stark contrast to the US and Asia, where securitisation issuance contributed 1.4% and 1.8% to their respective GDPs. AFME is urging policy makers to introduce measures to enhance risk sensitivity in the prudential framework for banks and review frameworks for non-bank investors. With EU's financing needs at an all-time high due to recent economic shocks and the green and digital transitions, AFME believes that securitisation can help banks finance economic growth by freeing up their balance sheets to facilitate lending.
Policy Action Needed for Europe's Lagging Securitisation Market
AFME is urging policy makers to introduce measures to enhance risk sensitivity in the prudential framework for banks and review frameworks for non-bank investors. By introducing these measures, European policy makers can help revive the securitisation market and boost the region's economic growth. A vibrant securitisation market is crucial for the competitiveness of Europe's financial services sector, especially in the face of rising inflation, tightening monetary policy, and increasing capital scarcity.
Additionally, securitisation can play a vital role in helping banks finance the unprecedented amount of capital needed for Europe's green and digital transitions. This would enable them to compete more effectively with their global peers. By leveraging securitisation as a financing tool, Europe can channel liquidity from capital markets to the real economy and support economic growth in the region.
If the article could mean changes to the regulations, the impact for banks and non-bank investors would be significant. Banks could benefit from enhanced risk sensitivity in the prudential framework, providing them with more flexibility in managing their balance sheets and facilitating lending. On the other hand, non-bank investors would likely experience changes in the frameworks that govern their investment activities, which could impact their risk assessments and investment strategies related to securitisation.
To stay compliant with potential changes to the regulations, banks should proactively review their risk management practices and ensure alignment with the evolving regulatory requirements related to securitisation. Non-bank investors should stay informed about any updates or changes in the frameworks governing their investment activities, enabling them to adjust their risk assessment and investment strategies accordingly.
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