EU Securitisation Reform: A New Era for Financial Markets

The European Union has introduced a reform of the securitisation framework, which aims to revive the market and increase transparency, simplicity, and comparability. The reform is a response to the financial crisis and is designed to reduce the risks associated with securitisation. The new rules will apply to all securitisations, including asset-backed securities and mortgage-backed securities. The reform introduces a new definition of securitisation, which includes all types of transactions that involve the transfer of credit risk. The European Securities and Markets Authority (ESMA) will be responsible for registering and supervising securitisation repositories. The reform also introduces new requirements for risk retention, due diligence, and disclosure. Originators will be required to retain a minimum of 5% of the credit risk of the securitised assets. Investors will be required to conduct thorough due diligence on the securitised assets and the originator. The reform also introduces new rules on transparency, including the requirement for securitisation repositories to make information available to investors and regulators. The European Commission has also introduced a new framework for simple, transparent, and standardised (STS) securitisations. STS securitisations will be subject to less stringent requirements and will be eligible for more favourable capital treatment. The reform is expected to increase the attractiveness of securitisation as a funding tool for banks and other financial institutions. It is also expected to increase the availability of credit to households and businesses. The reform has been welcomed by the financial industry, which sees it as a positive step towards reviving the securitisation market. However, some critics have argued that the reform does not go far enough in addressing the risks associated with securitisation. The reform is part of a broader effort by the European Union to strengthen the regulation of financial markets and to increase transparency and accountability. The European Union has also introduced new rules on banking regulation, including the Capital Requirements Regulation and the Bank Recovery and Resolution Directive. The reform of the securitisation framework is expected to have a significant impact on the financial industry, and is seen as a key step towards creating a more stable and transparent financial system. The European Union has a long history of regulating financial markets, and the reform of the securitisation framework is the latest example of this effort. The reform is expected to increase confidence in the securitisation market, and to encourage more investors to participate in the market. The European Union has also introduced new rules on investor protection, including the Markets in Financial Instruments Directive (MiFID II) and the Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation. The reform of the securitisation framework is part of a broader effort by the European Union to increase transparency and accountability in financial markets, and to protect investors. The European Union has a strong commitment to regulating financial markets, and the reform of the securitisation framework is a key example of this commitment. The reform is expected to have a significant impact on the financial industry, and is seen as a positive step towards creating a more stable and transparent financial system.

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