- Opinions differ as to why European securitization issuance volumes remain significantly down on the levels seen before the financial crisis.
- In a recent joint paper on the topic, the ECB and the Bank of England provided their diagnosis, listing proposed regulatory changes and a reliance on credit ratings among the roadblocks that they believe are currently preventing more substantial new issuance.
- We believe that it is the wider macroeconomic and banking system backdrop that has held back issuance volumes in recent years, rather than any specific securitization industry issues.
- Looking ahead, however, we agree that current regulatory proposals pose a major threat to the viability of the European securitization market.

Opinions differ as to why European securitization issuance volumes remain significantly down on the levels seen before the financial crisis. According to a new report titled "What's Holding Back European Securitization Issuance?," published today by Standard & Poor's Ratings Services, it is the wider macroeconomic and banking system backdrop that has held back European securitization issuance volumes in recent years, rather than any specific securitization industry issues.

"We include ongoing economic weakness, low underlying credit origination volumes, bank balance sheet retrenchment, and plentiful cheap alternative funding sources as reasons why European securitization issuance is still low in some countries," said credit analyst Andrew South.

In a recent joint paper, the European Central Bank (ECB) and the Bank of England provided their diagnosis, listing proposed regulatory changes and a reliance on credit ratings among the roadblocks that they believe are currently preventing more substantial new issuance.

"In principle, the securitization market is well-placed to once again take up a more significant role in the European financing landscape, when fundamental conditions improve and the official sector withdraws its funding support. However, we agree that current regulatory proposals pose a major threat to the market's viability if they are implemented without further amendments. They could deter banks and insurers from holding securitizations, potentially switching off demand from a large portion of the investor base."

"By contrast, we believe our current rating methodologies are justified, and we don't think that they are significantly constraining securitization issuance prospects," Mr. South concluded.

Standard & Poor's Ratings Services

Donwload the report below (PDF 9 pages)

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