05 Feb Asset Securitisation: From destroyer to saviour?
Securitisation helped cause the global financial crisis that the world economy has still not fully recovered from. It was perhaps inevitable that it would be penalised in the regulatory reaction that followed, arguably excessively and to the detriment of the underlying economies. However, it has now emerged as the officially recommended means of creating a vital missing instrument in the Eurozone – a liquid safe asset with limited exposure to the credit risk of any single government.
This would greatly reduce the risk of the sovereign-bank connection that proved so damaging in the Eurozone crisis. It may also lead to a wider rehabilitation of Securitisation in general, allowing it to more fully play its role in providing funding for essential everyday economic activities such as home purchases.
The European Systemic Risk Board (ESRB) in January, came out with a report recommending using Securitisation to create a Euro-zone safe asset – a Securitisation of Eurozone government bonds, nicknamed ESBies. The report was created by a High-Level Task Force on Safe Assets commissioned by the ESRB General Board in 2016 with a task to investigate the practical considerations relating to sovereign bond-backed securities (SBBS). You can read more about it here.
The FT followed up with an Editorial in FT View last week recommending using sovereign bond-backed securities (SBBS) to create a truly pan-eurozone benchmark safe asset as this would be good for investors who would have a diversified alternative to holding eurozone sovereign bonds. You can read the full FT View editorial here
—————————
With the securitisation markets tipped for a big revival, this is the perfect time to learn the latest developments and prepare for the future. EIMF will be offering a two-day course on Mach 5-6 at its premises in Nicosia. During the course participants will review today’s securitised market, and exploit the opportunities provided when using these financial instruments. They will learn to recognise the optimum internal and external conditions and how to capitalise on them and learn essential risk techniques. To learn more please visit the seminar page here