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26 March 2014

Bloomberg: EU seeks to boost asset-backed debt market to spur business

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Commissioner Barnier will back international efforts to define "high quality" securitisations, with a view to "a possible preferential regulatory treatment for such products", according to a document obtained by Bloomberg News.

Barnier will also seek global accords on measures aimed at improving information available to potential investors in bundled debt, and on how banks that carry out securitisations should retain some of the risks, according to the document.

In tandem with toughening regulations, authorities are increasingly looking for ways to encourage the revival of the market to allow banks to expand their lending and to boost the role of other institutional investors in financing businesses. “The climate on uncertainty and risk aversion created by the financial and economic crisis has affected both the supply and demand of long-term financing", according to the document.

Banks are also urging the Basel group, which brings together regulators from 27 nations including the UK, US and China, to ease rules on the amount of capital they must have to cover possible losses on purchases of securitised debt.

Barnier’s plans on securitisation are part of a package of measures to boost long-term corporate financing that he will present on 27 March, according to the EU's website. The proposals also include a review of regulations for covered bonds, guidelines for crowd-funding websites, and a draft law on occupational pension funds. “Europe’s historically heavy reliance on bank intermediation needs to move towards a more diversified system of direct capital market financing and a greater involvement of institutional investors", the EU Commission said.

The Commission will also assess whether to introduce a savings account that would be available across the 28-nation bloc and used to finance long-term projects. It is also planning to unveil in the coming weeks a draft law to boost company shareholders’ say on executive pay, according to the document.

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