The European Commission (EC) has launched its Capital Markets Union Action Plan, which could have far-reaching consequences for real estate finance and securitisation.
The five-year programme outlines the EC’s plans to build a single market for capital across all 28 EU member states and will see a raft of news rules introduced affecting sectors such as securitisation, infrastructure investment, and covered bonds.
The EC’s proposals for “simple, transparent and standardised” securitisation classification were criticised by CREFC Europe last month for failing to accommodate CMBS transactions, which lacked the granularity and homogeneity of many other kinds of asset backed securities.
It wants to introduce two legislative proposals: a securitisation regulation to cover due diligence, risk retention, transparency and the criteria for “simple, transparent and standardised” securitisations; and an amendment to current capital requirements to make the capital treatment of securitisations more risk sensitive.
The EC also wants to encourage infrastructure investment by removing “unjustified prudential obstacles so that insurers play an important role in European infrastructure projects”. New legislation will create “a distinct infrastructure asset class [which] reduces the amount of capital which insurers must hold against the debt and equity of qualifying infrastructure projects”.
A public consultation will also begin on a pan-European framework for covered bonds, one of the largest sources of finance for the real estate market. The EC wants to reduce market fragmentation to help standardise underwriting and disclosure practices. It will decide what action to take once the consultation closes at the end of the year.
In a statement released today, the EC said: “The overall goal for CMU is to create opportunities for investors, connect finance to the wider economy, and foster a more resilient financial system, with deeper integration and more competition. Our approach will be pragmatic, step-by-step, based on rigorous economic analysis and mindful of financial stability risks.”