Securitisation in the Cayman Islands in 2009 – down but not out
A bid by European Union lawmakers to ease planned curbs on bank securitisation failed the legal clarity test in Strasbourg, France, in the first quarter and would make lawyers richer, a senior official from the EU’s executive said earlier this year.
The EU is updating its bank capital requirement rules to apply lessons from the credit crunch, which saw highly rated securitised products sold by banks quickly slump in value.
EU Internal Market Commissioner Charlie McCreevy has angered banks by proposing they must retain 5 per cent of the securitised products they sell in a bid to improve underwriting standards.
Banks say the securitisation market is frozen and such curbs will not bring it back to life and provide much-needed funds.
The bloc’s member states have already provisionally backed McCreevy’s plan despite fierce opposition from Britain, home to the EU’s biggest banking centre.
The European Parliament, which has joint say with EU states, is seeking to broker a final deal and some lawmakers want no retention on “good” securitised products and retention of up to 20 per cent on “bad” or more risky products.
A senior McCreevy official sought to kill the attempt.
Patrick Pearson told parliament’s economic affairs committee the twin approach did not satisfy the test of legal clarity and was rejected by 26 of the EU’s 27 member states when proposed by Britain.
“We will not accept that type of distinction. The only people who will get any benefit from this are (English) company lawyers,” Pearson said.
The Commission was open to a higher retention figure than 5 per cent, Pearson said.
Parliament and EU states are racing against time to adopt the reform by the end of April when the assembly goes into recess for June elections.