Title Simple, Transparent and Standardised Securitisation. Business as Usual? Date 15/09/16 Description The resurrection of the securitisation market lies at the heart of the EU project to build a panEuropean
capital markets union (CMU) and it recently flowed into the Commission proposal for a
Regulation laying down a framework for Simple, Transparent and Standardised (STS) securitisation.
This article offers a critique of the EU project to create a capital markets union and in particular of
the proposed framework for STS securitisation. It is firstly centred on the problematic coordination of
the policy objectives that underlay the very conflicting aims in this area of financial regulation.
Secondly, it points to four more specific areas of concern, namely, the definition of securitisation for
the purpose of the regulation, the linkages with the shadow banking system, the reliance on external
ratings, and the question of supervision and regulation.
This article contends that the persistence of these problems in the current design leads to
questioning whether a revived securitisation market would still fuel the shadow banking system and create systemic risks. It points out that the difficulty to regulate complex legal relationships, typical of long intermediation chains, make the proposed framework still weak. This article submits that only a tighter approach to transaction standardisation could ensure the simplicity and transparency that the Commission is hoping to achieve. Equally, a supervisory infrastructure centred on the overseeing power of a pan-European authority is needed to prevent the recurrence of pre-crisis legal problems.
Persons Vincenzo Bavoso