Re-capitalizing major banks is not sufficient to reestablish robust liquidity in the European credit risk transfer market. Restoring investors’ confidence and progressing reforms require enhanced transparency and standardization, notably on repo’s and securitizations.
Many policy makers recommendations listed in the forum topic “Shadow Banking Regulation in Europe” focus on enhancing disclosure and information-gathering by authorities. “While progress is being made, the exercise underscored the need for significant improvements in data availability and granularity to adequately capture the magnitude and nature of risks in the shadow banking system,” the FSB said.
For securitizations in Europe, here are the most important transparency initiatives currently sponsored in Europe by central banks and by the banking industry :
- ECB initiative for ABS loan-level information (European Data warehouse or ED) : http://www.ecb.int/paym/coll/loanlevel/html/index.en.html
- AFME and EFR initiative for Prime Collateralized Securities (PCS) labeling : http://www.efr.be/documents/news/PCS%20press%20release%2020120612.pdf
Considering policy recommendations on transparency, the following questions remain open for debate :
- Will more transparency also revive Europe’s secured lending and securitization markets?
- What additional infrastructure changes would strengthen market liquidity and robustness?
- Will transparency on market flows and counterparties help to restore investor confidence?
- What other initiatives would help reviving desirable credit risk transfers ?