28 June 2011
Securitisation regulation in Europe must be overhauled to differentiate between the products that are essential to financing economic growth and the more notorious transactions that have become associated with the financial crisis.
The present one-size-fits-all regulatory definition of securitisation, based on that put forward by the Basel II Accord which has, in essence, been adopted by the European Commission in the Capital Requirements Directive, suggests that securitisation is a single definable product.
Yet, in reality, there are a wide variety of securitisation product types ranging from secured corporate debt through to exotic derivative trades and it is wrong to suggest that they can be categorised together because they share an abstract "unifying" set of characteristics.
A new approach to defining and categorising transactions will help to distinguish the products and assist in delivering regulatory approaches which fit the demands of the particular product type.
This proposed approach which assesses securitisations by reference to skills sets will provide a sounder basis for deciding whether a transaction is a "good" securitisation or a "bad" one and so whether it deserves encouragement as an essential part of the solution for funding the recovery of the real economy in many jurisdictions, or prohibited in some way as a cause of the global credit crisis.
A better schematic for regulating securitisation in Europe is part of New Landscapes – practical evaluations of new regulations impacting structured debt transactions. This is the latest publication from Clifford Chance's international structured debt group. New Landscapes explores the re-emerging securitisation market and considers new regulations in Europe and the US that impact securitisation and issues that have emerged in the implementation of that regulation.
A better schematic for regulating securitisation in Europe