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13 October 2015

Reuters: French bank chief sceptical of EU plan to revamp securitisation

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French Banking Federation chief Frederic Oudea said that EU proposals aimed at relaunching the market for asset-backed securities are actually likely to shrink it in the short term.

"I do not think we should expect with these proposals a strong recovery of securitisation," said Oudea. "I rather expect a reduction of the volume of securitisation in the next two to three years."

Announcing the initiative at the end of September, Hill stressed that only "simple, transparent and standardised" debt would qualify for more lenient regulatory treatment.

But Oudea said he sees the new criteria set by the European Commission to issue safe securities as complex and detrimental to the market, at the least in the short term. He was also critical of EU regulation that he said could hamper European banks and favour U.S. competitors.

The European fight against the "too big to fail" model, which caused taxpayers to pay the cost of rescuing banks during the euro zone financial crisis, has now reached the point that "the bigger you are, the more problems you have," Oudea said, ruling out cross-border mergers of European banks in the near future.

A Green Party member of the European Parliament called for stricter safeguards, such as requiring banks to retain 20 per cent of the securitised debt they create, rather than just 5 percent under current rules.

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© Reuters

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