  On the demand side, the investor base has been and remains severely eroded and many earlier active investors, such as SIVs and money market funds, are not expected to return to the market anytime soon. Europe in particular suffers from a lack of a significant real-money investor base that could step in.   On the supply side, concomitantly, the profit generating potential of securitisation remains insufficient, since spreads for various ABS still exceed the break-even levels from the issuer’s perspective. At the current levels of spreads, securitisation does not make economic sense for originators in most cases. At the same time, it would appear that current yields, with some exceptions, are not attractive to compensate for the perceived risks in the view of many investors. Therefore, although there are some signs of improvement, the current situation in structured finance continues to impose market funding constraints on banks and to hamper banks in  1  See “The Euro Area Bank Lending Survey”, April 2010, ECB. BIS Review 84/2010  3  providing credit to the economy. In this sense, securitisation is still certainly unable to fulfil the objectives that I highlighted at the beginning of my speech. Going forward, the key question is therefore: how do we bring back investors to the securitisation markets? This is tantamount to asking: how can investor confidence in securitisation be restored?
However, when these principles are transposed into specific provisions in some market convention, consensus becomes less easy to reach. In fact, aligning all the stakeholders’ incentives often proves to be difficult and there is the risk of only reaching a very low minimum common denominator. Certainly, this would not be sufficient to win back the confidence of public and private players in securitization. I therefore invite the industry to continue and to strengthen its efforts in this vital area of work. VI. Concluding remarks  Let me conclude by saying that, if managed in good order, securitisation should be a welfareimproving tool, because value is created by secured funding that is correctly structured and allows to adequately distribute financing and funding, and the related risks among households, enterprises, banks and investors. When it works properly, securitisation may represent a significant step towards more complete credit markets, thereby contributing to enhancing the efficiency of the economic system. The revival of securitisation markets is  BIS Review 84/2010  5  needed in many countries to support the provision of credit to the real economy, particularly to households and small business. While it is essential to define new market standards in terms of simplicity and transparency, more actions may be needed to re-start the securitisation market. There does not seem to be one single and simple solution that can unlock the securitisation market.