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Securitised debt market revival sought

Written by Business World, on 18th Feb 2015. Posted in Economy

article headlineThe EU looks set to reduce capital charges on securitised debt to revive a market that triggered the global financial crisis but is now seen as key to funding the region's flagging economy. The EU's executive European Commission said today it was planning to create a new class of high quality, simple, asset-backed securities that could benefit from lighter capital requirements, and help to plug funding gaps in Europe. The plan is part of a broader EU programme announced today to make it easier for companies to raise cash on stock and bond markets, hoping to emulate the more active capital markets of the United States. Securitised debt, or asset-backed securities (ABS), based on pooled "subprime" U.S. home loans turned toxic in 2007, sparking a crisis that ended up with taxpayers having to bail out a string of banks on both sides of the Atlantic. Brussels is expected to loosen capital charges on top quality ABS to encourage banks to produce more, and insurers to buy it. Global regulators have been leery of such a move so far, leaving the EU forced to contemplate unilateral action. "There is no intention to undo what has been put in place in the EU to keep the door closed to highly complex, opaque and risky securitisation," the Commission said. The plan is part of the Commission's broader Capital Markets Union (CMU) project that was put out to public consultation today, which aims to unify markets by 2019 so they can raise money more effectively for companies to grow. (Reuters) For more visit www.businessworld.ie

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