Mon. Feb 6th, 2023

Plenary adopted the final pieces of the Capital Markets Recovery Package that will promote lending to businesses and households, which is vital for economic recovery.

Parliament adopted on Thursday the Capital Requirements Regulation (with 460 votes to 171 and 57 abstentions) and the General framework for securitisation (with 454 votes to 172 and 62 abstentions). These both belong to the Capital Markets Recovery Package, which is part of the EU’s overall COVID-19 recovery strategy.

Packaged loans converted into securities will free bank balance sheets of non-performing exposures and promote lending to the real economy, which is vital to economic recovery.

Paul Tang (S&D, NL), the lead MEP on securitisation framework said during the debate on Wednesday: “Securitisation allows banks to package and sell loans, which reduce their exposure to financial risks and free up capital for new loans. This in turn helps to increase financing of the real economy, and this is what we want during the COVID-19 crisis. The proposal should make it easier to sell non-performing loans, and I proposed to expand the STS label (simple transparent and standardised securitisation) to a new class of synthetic securitisation. We are always aware of dangers, as the selling of loans can be a way to hide the internal weaknesses of banks, or exposing others to unexpected risks. It is crucial to properly regulate and supervise securitisation. Therefore, we made sure that competent authorities would be authorised to monitor risks closely and give warning signs when risks get too excessive”.

“Finally, the issuing bank will always have to retain a material exposure to loans, we minimised a counterparty risk, and we simplified the structure of financial products to reduce the risk of them being used to trick a supervisor”, Tang added.

Markus Ferber, speaking on behalf of Othmar Karas (EPP, DE), who was responsible for the capital treatment of securitisation, said: “Securitisation has a bad reputation because of the 2009 crisis, but the instrument in itself is not bad. But it has to be used properly. Securitisation can be a way of packaging some liquid assets into tradable securities, which creates funds that can be further distributed in a form of credit. New securitisation is a major building block of financial markets; what was once a poison has become a cure which will help fight the economic consequences of the COVID-19 crisis, and speed up the recovery as it would allow banks’ lending to SMEs. Our aim is to adjust the system to allow securitisation to play an effective role in the recovery.

Next steps

Once Council has also formally approved the regulations, they will enter into force on the twentieth day after its publication in the Official Journal of the EU.

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