A European agreement last week to revive the EU's securitisation market will give a "massive boost" to an industry in Ireland that holds some €415 billion of international assets, according to Fine Gael MEP Brian Hayes.
The European Parliament, Council and Commission agreed last week on a package that sets out criteria for simple, transparent and standardised securitisation. This is seen as a cornerstone of the European Capital Markets Union, the commission's project to build a single market for capital in the EU and lessen companies' reliance on bank finance.
Securitisation involves the packaging of loans – including residential and commercial mortgages, car loans and credit card debt – into special purpose vehicles and selling bonds backed by the income from the loans to investors. However, investors globally lost billions of euros during the financial crisis on investments in bonds backed by US subprime mortgages and risk debt.
“Due to the irresponsible activity around mortgage-backed securities in the US, securitisation has become a dirty word,” said Mr Hayes. “The securitisation industry in Europe, however, is completely different to that of the US. Through the crisis, EU securitisation products suffered relatively small reductions in value compared to US securitisation.”
He said that Dublin’s financial services industry, where almost 800 securitisation vehicles are registered holding assets of about €415 billion, is poised to “capitalise” on the new EU framework for the industry.
"Brexit poses many challenges and opportunities for the EU securitisation industry. The City of London is the biggest EU destination for securitisation," said Mr Hayes. "But when the regulation comes into force, all entities engaging in EU securitisation will need to be based in the EU. This gives Ireland a great opportunity to attract special purpose securitisation vehicles."
