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06 February 2017

Financial Times: Plan to boost EU securitisation market stalls over Brexit

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A Brussels project to “turbo-charge” Europe’s securitisation market risks becoming a casualty of the UK’s Brexit vote amid political clashes over how far financial centres from outside the bloc should be allowed to take part.

The European Commission’s plans would make it cheaper and easier for banks and other investors to use securitisation — packaging and selling on mortgages and other loans — on condition that the structures are simple and easy to understand.

However, political tussles between the European Parliament, on one hand, and Paris and Berlin, on the other, over how to address the City of London’s departure from the EU could delay implementation.

Paul Tang, the MEP responsible for work on the legislation, said that the question of market access rights for non-EU financial firms had become highly sensitive since the UK’s Brexit vote last June.

Tensions centre on European Parliament plans to include “equivalence” rules in the law. These would allow non-EU companies to create STS-compliant packaged debt on condition that their home countries had strong regulation and supervision.

But the idea has raised hackles in Paris and Berlin, which are wary of setting any precedent on financial market access at a time when Europe is preparing for Brexit talks with London.

The City of London has identified “equivalence”, an idea used in other EU financial services laws, as one of its best options for securing preferential access to the European single market after Britain leaves the EU.

Full article on Financial Times (subscription required)

© Financial Times

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