The need to boost the competitiveness of the European economy and new regulatory requirements related to long-term bank financing will support the further development of the securitization market in Poland and Europe, according to experts from the DLA Piper law firm. During the first three quarters of this year, the European securitization market saw an increase in the number of transactions by more than half.
In October, the European Commission initiated official expert consultations on the functioning of the securitization market, seeking a way to increase financing for the economy and strengthening capital markets. Securitization allows banks and non-bank lenders to raise capital to increase credit, loan or lease actions by converting claims arising from granted loans, loans or leases into securities, which become subject to trading.
“Undoubtedly, securitization is becoming increasingly important for the development of the European capital market. It suffices to point out that the European Commission has started the consultation process on the functioning of securitization in the EU“- says Paweł Turek, counsel in the DLA Piper finance team in Warsaw. “This also has very important significance for the Polish capital market and its further development“.
Based on a report by the former president of the European Central Bank, Mario Draghi, the European Commission has established the investment needs of the European Union at 800 billion euros annually. Securitization is to be one way of generating capital, which if properly invested would boost the European economy. The authors of the report noted the much smaller role securitization plays for European banks compared to the competitive US economy. Securitization emissions accounted for just 0.3% of the European Union’s GDP in 2022, while in the United States it made up 4% of GDP.
“At the European level, the term “securitization 2.0” as a remedy for increasing the competitiveness of the EU economy against the much faster-developing economies of the USA and China is starting to be used.“- adds Paweł Turek.
Last year, the European Central Bank called for accelerating work on a common capital market. An essential part of this is to be a large securitization market, by which banks could transfer some risk to investors, free up capital and unlock additional borrowing. This capital would then be invested in the development of sustainable technologies and digitization. According to EU data, investment needs reach 620 billion euros annually for green transformation and 125 billion euros for digitization up to 2030.
DLA Piper experts also point out that an important factor favoring the development of securitization in Poland could be the entry into force in 2025 of requirements resulting from European regulation CRR 3, which among other things, standardizes reporting methods and the calculation of capital requirements due to credit risk. Moreover, this year, the Financial Supervision Commission issued the Recommendation WFD (on the Long-Term Financing Indicator), aimed at increasing the share of long-term debt instruments in bank liabilities, and with it the resilience of the banking sector to potential crisis situations.
“The Polish banking sector has been liquid for years, so it might seem that it does not need additional capital for investments. However, companies are trying to diversify their financing sources,” adds Paweł Turek. “Moreover, the demand for securitization is growing due to increasing capital requirements.
According to data from the PCS (Prime Collateralised Securities) industry organization, from January to mid-October 2024, 216 STS-type securitization transactions, meeting the “simple, transparent, standardized” (Simple, Transparent and Standardised) requirement, were executed in Europe, representing an increase of 54% compared to the previous year. The largest increase was recorded in the segment of securitization of trade receivables. Since the beginning of the year, 68 such transactions have been carried out compared to 26 in the same period in 2023.
Source: https://ceo.com.pl/dla-piper-sekurytyzacja-przyspieszy-rozwoj-gospodarki-w-europie-10560
