Securitisation is not the silver bullet but it can thus be seen as a seed instrument to reshape the European economy funding, whereby long‐term investors such as insurance companies, pension funds among other real money investors are given a more important role in the funding of the economy, while preserving the clients/banks relationship. These real money investors are natural investors in securitization also because they have long-term liabilities that ought to be matched by long-term investments. However, it seems now clear that the changes in the regulatory treatment of ABS in the aftermath of the crisis, which were to a great extent a response to events in the US, may arguably have hindered the development of the European ABS market. These postcrises regulatory proposed reforms (CRD IV and Solvency II) lead to a substantial increase of the capital charges for investments in securitisations. It is worth mentioning that risk weighted assets calculated on ABS tranches can be several times the risk weighted assets of the constituting pool. Further, the due diligence process that must be put in place to invest in ABS represents a considerable burden. The common practice in the US of full derecognition of assets also led to regulatory changes with impact on the supply side, and may have been a main cause of depression in the European ABS market, which in many cases already had provisions against lack of “skin in the game”.
Carlos da Silva Costa: Reviving markets in high quality securitisation in Europe Address by Mr Carlos da Silva Costa, Governor of Banco de Portugal, at the European Investment Bank/International Monetary Fund Meeting, Brussels, 23 October 2014. *  *  *  Let me start by congratulating the EIB and the IMF for this initiative. It is very important to assure that the topics chosen for this workshop (SME Securitization and Distressed assets) be at the forefront of policy makers’ and regulators’ concerns. A more healthy European financial system requires progress in these areas. Six years since the onset of the financial crisis in 2008, output levels in the EU are below those observed before the crisis. The same is true for employment and investment. Some countries have fared much worse than this average while adjusting their balance sheets and external accounts; that has been accompanied by deleveraging in all sectors, along with changes in relative prices vis-à-vis the rest of Europe in a low inflation environment. All this is taking place at the zero lower bound on the nominal interest rate, where active monetary policy can only be unconventional. The role of financial markets is crucial in this story. But the distinction of the direction of causality is difficult: is the economy weak because of financial markets or are financial markets weak because of the economy? The question is often put as: is the problem supply or demand for, say, credit?