(Bloomberg) -- The European Investment Bank is preparing to pump more money into the region’s asset-backed securities market once long awaited reforms take hold, according to Vice President Gelsomina Vigliotti.
“Now, it’s the time to deliver,” she said in an interview, referring to the EU’s long-discussed plans to develop its financing infrastructure through a capital markets union. With Poland taking the European Union presidency in the new year, “our ambition is to contribute to the development of the capital markets union, also through some instruments that can be built to serve Europe at large.”
While the European Union has deliberated on CMU for almost a decade by urging nations to lower barriers, securitization is part of that grand plan that’s seen as most likely to be implemented in the short term. The European Commission has sounded out industry about a range of measures to make it easier for banks to offload their loans to third-party investors.
Speaking on the sidelines at the recent Web Summit in Lisbon, where she was promoting the EIB’s financing offerings to tech companies, Vigliotti said the EIB traditionally lends money to banks but “over time we have seen that what they are more interested in is to free up part of the capital through guarantees and securitizations.” The lender deployed almost €90 billion ($95 billion) in investment last year.
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. Around the same period, that market grew significantly in the US, hitting €13.7 trillion in 2021. The EIB said it invested €5.8 billion last year in securitizations.
Beyond securitization, developing deeper and broader capital markets would also help the startups and high-growth companies the EIB helps fund and which often move to the US once they reach scale. Capital markets are also seen as vital to funding the green transition and projects to boost Europe’s competitiveness.
“We need to further develop the CMU because the amount of investment required is huge,” Vigliotti said.
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