(Bloomberg) -- The European Central Bank is set to trial an accelerated approval process for significant risk transfers, potentially making the deals more attractive for banks, supervision head Claudia Buch said.
The ECB is planning to start a “pilot” next year that it has developed with an influential banking lobby, the European Banking Federation, Buch said at a press conference on Tuesday. Shortening the approval could benefit not only the industry but also regulators, who would need to commit fewer resources, she said.
“We generally think that securitization can be a useful instrument to move risks to the part of the financial system where they can be better born than on banks’ balance sheets,” Buch said.
Bloomberg News reported earlier this month that the ECB is working on new SRT rules that would cut the time when banks must submit information to the ECB ahead of an SRT. The instruments are a popular way for lenders to make better use of their capital, by shifting credit risk to investors outside the banking sector. The deals typically require ECB approval to have the desired capital effect.
Buch emphasized that despite efforts to make the process quicker, the watchdog wants to make sure banks’ resilience isn’t compromised and there’s no “spill-back effect” into the finance industry.
“We will never lose resilience out of sight,” Buch said on Monday about the SRT market. “So who is financing these significant risk transfers and could there be amplification effects in the financial system? Of course, we need to monitor this very closely.”
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