European Union countries intend to fast-track a plan to boost capital markets that would give the utmost priority to measures aimed at revamping securitisation, the rotating president of the bloc will say on Thursday during a summit of EU leaders. The EU financial services chief Jonathan Hill announced a far-reaching plan at the end of September to put in place the building blocks of a "capital markets union" (CMU) by 2019 in an effort to revive sluggish economic growth.
EU finance ministers are expected to forge a common position on the plan at their next regular Ecofin meeting on November 10, considerably shortening EU legislative procedures that usually take much more time. "The intention is to adopt Council conclusions on the CMU action plan at the November Ecofin meeting," Luxembourg Prime Minister and rotating President of the EU Council Javier Bettel said in a letter to EU leaders before their meeting on Thursday.
The letter, seen by Reuters, will form the basis of his presentation at the EU summit. In the text, Bettel underlines that "making swift progress on the legislative proposal on securitisation is considered to be of the highest priority". Niall Bohan, the senior European Commission official who authored Hill's plan, said there was a need to maintain political momentum beyond the "honeymoon period" and into 2016 as some states were tempted to "pick holes" in CMU.
"We need to keep them focused on why this is important," Bohan told a QED seminar in Brussels. "We need to show we can deliver the promised land of CMU." An EU diplomat from a small member state cautioned that given major issues like migration facing Europe, it would be hard to get governments focused on CMU. Many of the big barriers to CMU are not legal or political, but cultural - getting small investors to put money into riskier stocks and bonds, Pablo Bidegain, a Spanish centre-right member of the European Parliament, told the seminar.
EU leaders will briefly discuss the future of the euro zone in their meeting on Thursday and intend to have a more defined position at their next meeting in December. One of the early actions of the CMU plan is a draft European Union law to kick-start the market for securities based on the pooling of loans such as mortgages, known as securitisation. Securitised debt based on low-quality US home loans became untradeable in 2007, helping to spawn the global financial crisis and tarnishing the sector in Europe, which is still only half its pre-crisis size. In an attempt to increase banks' lending capacity while keeping risk under control, Hill proposed lower capital charges for asset-backed securities that fall within a new category of "simple, transparent and standardised" (STS) debt.