- PGIM recently responded to the European Commission's (EC) targeted consultation on the functioning of the EU securitisation framework. This paper reflects the views within our submission to the EC.
- Expanding access to funding sources and credit are critically important objectives as Europe seeks to maintain its competitiveness in the global economy. The securitisation market can facilitate this credit expansion by connecting consumers and businesses in need of financing with global investors who are keen to diversify portfolio exposures. In doing so, securitisation can help fund the real economy and strengthen Europe's financial stability by decreasing its overreliance on the banking system.
- Unfortunately, Europe's securitisation market is not in a state to meet the current or future needs of its economy. It is now only 17% of the size of the U.S. market (down from 85% pre-GFC), annual issuance only comprises 0.3% of European GDP (vs. 2.6% for Australia, 1.2% for the U.S., and 0.7% for the UK), and the market size has been dwarfed by Europe’s own covered bond market.
- We are confident that regulatory reform can contribute to the rebuilding of Europe’s securitisation market, thereby enhancing the global cohesiveness and competitiveness of Europe’s capital markets. The process of reviving Europe’s securitisation market would also allow European financial intermediaries to increase and diversify their funding sources, rationalise balance sheet risks, and deploy capital more efficiently.
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