EC to Propose Relaxed Capital Requirements for Simple Securitizations

Speaking at a hearing in Brussels on Monday, June 8th, European financial services Commissioner Jonathan Hill told lawmakers that the European Commission (“EC”) will propose lighter capital requirements on simple pooled debt instruments as part of the EU’s Capital Markets Union proposal. According to a Reuters article, Hill said “This will enable us to put in place more appropriate capital and solvency requirements for investors, so that simple securitisation products do not end up being penalized.” These statements come as the EC concludes its consultation on simple, transparent and standardized securitization, the results of which should be published in September.

The Basel Committee on Banking Supervision (“BCBS”), which establishes global standards for capital rules, and the International Organization of Securities Commissions (“IOSCO”) recently suggested similar preferential treatment was possible for simple, transparent and comparable securitizations, but these statements by Hill suggest the EC may not wait for the BCBS to act and will instead take matters into its own hands.

SFIG commented on both the EC consultation (available here) and the BCBS-IOSCO consultation (available here) through its High Quality Securitization Task Force. To join the task force, please contact Amanda.Bateman@sfindustry.org.

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