Nor can the proposed calibration fully reflect the future benefits of recently-adopted regulatory enhancements. For example, how does one capture the benefit of having loan-level data and more standardised investor reports in a numerical calibration?
The resulting strict risk weights in the current discussions may, I fear, not only curtail any growth in EU SME securitisation markets, but further damage the market from its current state. The revised securitisation framework should reflect the risk-mitigating features of high quality securitisation. It is therefore important that the EU moves ahead swiftly in addressing inconsistencies in the treatment of high quality securitisation.