(Bloomberg) -- The European Union is moving ahead with plans to boost its asset-backed securities market by gathering financial industry feedback for a wide range of potential measures, including a continent-wide securitization platform.
One option would involve the use of public guarantees both at national and EU levels to scale up the market and create a new common “safe asset” across the 27-country bloc, the European Commission said in a 37-page consultation released Wednesday. An alternative idea would focus on pooling of resources and information to reduce issuance costs.
“Would the establishment of a pan-European securitization platform be useful to increase the use and attractiveness of securitization in the EU?” the EU’s executive arm wrote in a questionnaire to bankers, investors and other markets participants.
Former European Central Bank President Mario Draghi has said the EU needs to invest as much as €800 billion ($877 billion) extra a year and commit to the regular issuance of common bonds to make the bloc more competitive with China and the US in the coming years.
Even though EU nations remain deeply split over the need for more joint debt, the EU’s executive arm is working on ways to improve its securities market. The public consultation published Wednesday includes dozens of questions and is due in eight weeks.
The overall market for securitization in Europe has declined dramatically since its peak of approximately €2 trillion during the 2008-2009 financial crisis, down to €1.2 trillion at the end of 2023. In the same period, that market grew significantly in the US, hitting €13.7 trillion in 2021.
The matter is part of a broad range of potential measures, including a reduction of capital charges for banks and insurance companies investing in asset-backed securities, or a streamlining of disclosures and regulatory requirements for issuers of such securities. The consultation also explores ways to improve the efficiency of the market for significant risk transfers, or SRTs.
“Securitization can help deepen capital markets and provide greater financing opportunities,” the commission wrote. “It will also free up the balance sheets of banks and non-bank lenders, thereby enabling them to provide additional lending to the real economy.”
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