On June 17, the European Commission published proposals to strengthen the European securitization market. A well-functioning securitization market can contribute to the objectives of the Savings and Investment Union. Think of increasing the financing possibilities for SMEs and contributing to the financing of the green and digital transitions. From DUFAS we endorse the importance of strengthening the European securitization market, but also see risks in the current proposal. Therefore, we have prepared a position paper with suggestions to adjust the proposals.
The proposed adjustments to due diligence obligations are an improvement for European transactions but practically exclude European investors from the global securitization market. Indeed, the proposed lightened due diligence regime does not apply to non-European issuers of sercuritisations. Non-EU providers are not required to report according to EU templates, but European investors under the new proposal are bound by the current, strict due-dilligence obligations when investing in non-EU securitisations. This makes it virtually impossible for European investors to invest in a market more than twice the size of the European one. This limits diversification, returns and competitiveness and reduces the efficiency of the European market.
It also proposes to introduce additional penalties for failure to comply with due diligence obligations. For fund managers, this is unnecessary because existing sectoral legislation such as the UCITSD and AIFMD already provide for appropriate supervision and enforcement. On the contrary, creating a separate sanctions regime could lead to less legal certainty and discourage new parties from entering the European securitization market.
We support the intention to simplify the disclosure templates, but find the proposed 18-month deadline for adjustment too long. Simple, more applicable templates are urgently needed to make the market more efficient.
Furthermore, we call attention to access to the STS label in project finance and real estate finance. These forms of financing are important for green transition and urban renewal. In addition, the proposed change in the definition of public securitizations could potentially unintentionally lead to a significant expansion of reporting requirements, thereby reducing rather than increasing the European market.
