EU’s ABS Revival Program Should Include Transparency, According to Parliament Member

Last Thursday, European Parliament member Paul Tang introduced a report calling for transparency in the E.U.’s ABS market. The E.U.’s plan to revive this market must contain “crystal-clear” disclosure rules to prevent investors from taking on excessive risk, according to a recent Bloomberg article.

In the report, Tang proposes a public register for “essential information of securitizations and which investor holds which position,” providing an “important safeguard whenever the market would come under stress in the future.” Additionally, in order to gain the benefits of securitization, “important lessons from the financial crisis have to be learnt, important lessons concerning asymmetry of information and moral hazard,” Tang wrote. “These problems will not be solved by the market on itself and need to be dealt with in the [simple, transparent, and standardized] STS framework.”

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