33

result(s)

Word(s)
Publication type
Policy area
Author
Keyword
Date

Enabling SMEs' access to capital markets

09-04-2019

Making it easier for small and medium-sized enterprises (SMEs) to access financing through public markets lies at the heart of the capital markets union – the plan to mobilise capital in Europe. Among the various reasons for going ahead with this union is the fact that existing requirements and listing costs in both regulated and multilateral trading venues continue to be disproportionate to the size and level of sophistication of SMEs. To further respond to this situation, the Commission has proposed ...

Making it easier for small and medium-sized enterprises (SMEs) to access financing through public markets lies at the heart of the capital markets union – the plan to mobilise capital in Europe. Among the various reasons for going ahead with this union is the fact that existing requirements and listing costs in both regulated and multilateral trading venues continue to be disproportionate to the size and level of sophistication of SMEs. To further respond to this situation, the Commission has proposed adopting a regulation to address the administrative burden placed on SMEs when listing or issuing equity and bonds, with the aim to increase liquidity on SME growth markets. The latter are a new category of multilateral trading facilities, which was established under the Markets in Financial Instruments Directive II. To this end, the proposal provides for targeted amendments to two key pieces of financial services legislation, namely the Market Abuse Regulation (MAR) and the Prospectus Regulation. Following interinstitutional negotiations the co-legislators reached a provisional agreement on the proposal on 6 March 2019, and this is due to be voted in Parliament during the April II plenary session.

Covered bonds – Issue and supervision, exposures

25-02-2019

Covered bonds are debt securities issued by credit institutions and secured by a pool of mortgage loans or credit towards the public sector. They are characterised further by the double protection offered to bondholders, the segregation of assets in their cover pool, over-collateralisation, and their strict supervisory frameworks. Currently, their issuance is concentrated in five Member States. National regulatory regimes vary widely in terms of supervision and composition of the cover pool. Lastly ...

Covered bonds are debt securities issued by credit institutions and secured by a pool of mortgage loans or credit towards the public sector. They are characterised further by the double protection offered to bondholders, the segregation of assets in their cover pool, over-collateralisation, and their strict supervisory frameworks. Currently, their issuance is concentrated in five Member States. National regulatory regimes vary widely in terms of supervision and composition of the cover pool. Lastly, despite benefiting from preferential treatment under the Capital Requirements Regulation (CRR), they share no common definition, which can lead to different securities benefiting from this treatment. To remedy this, the Commission has adopted proposals for, on the one hand, a directive, which would lay down investor protection rules and provide common definitions, and on the other, a regulation, which would amend the CRR with regard to covered bond exposures. In November 2018, Parliament and Council both adopted their respective negotiating positions. The file is currently the subject of trilogue negotiations. Second edition. The ‘EU Legislation in Progress’ briefings are updated at key stages throughout the legislative procedure.

Enabling sovereign bond-backed securities

05-12-2018

This briefing analyses the IA accompanying the legislative proposal of the Commission to enable market-led sovereign bond-backed securities (SBBS). The problem definition and the objectives of the IA do not follow entirely the better regulation guidelines. Nevertheless, the policy options, including the baseline scenario, seem logical and pertinent, lacking, however, necessary specification and precision. The assessment focusses on direct effects on the euro-area sovereign bonds market, expecting ...

This briefing analyses the IA accompanying the legislative proposal of the Commission to enable market-led sovereign bond-backed securities (SBBS). The problem definition and the objectives of the IA do not follow entirely the better regulation guidelines. Nevertheless, the policy options, including the baseline scenario, seem logical and pertinent, lacking, however, necessary specification and precision. The assessment focusses on direct effects on the euro-area sovereign bonds market, expecting no direct social or environmental impacts. The IA does not include the mandatory 12-week public consultation nor a comprehensive cost and benefit assessment of the initiative. It also omits, without explanation, a number of relevant issues, so that it seems like a missed opportunity to provide comprehensive and transparent support to evidence-based policy making.

Sovereign bond-backed securities: Risk diversification and reduction

13-09-2018

As a part of the European regulatory responses to the financial and sovereign debt crises, the European Commission has proposed a regulation on sovereign bond-backed securities (SBBS), a new class of low-risk securities backed by a diversified pool of national government bonds. The proposal seeks to provide an enabling framework for a market-led development of SBBS, thus encouraging banks and investors to diversify their holdings of euro area bonds. The proposal is meant to address a weakness that ...

As a part of the European regulatory responses to the financial and sovereign debt crises, the European Commission has proposed a regulation on sovereign bond-backed securities (SBBS), a new class of low-risk securities backed by a diversified pool of national government bonds. The proposal seeks to provide an enabling framework for a market-led development of SBBS, thus encouraging banks and investors to diversify their holdings of euro area bonds. The proposal is meant to address a weakness that appeared during the aforementioned crises, when banks' high exposure to their sovereigns' own debt, coupled with deteriorating creditworthiness of those sovereigns, led to balance sheet strains for banks. This in turn put pressure on government budgets, thus creating mutual contagion and financial instability. The procedure is currently at the initial stage in the European Parliament and the Council. First edition. The 'EU Legislation in Progress' briefings are updated at key stages throughout the legislative procedure.

Are Sovereign Bond-Backed Securities (‘SBBS’) a ‘self-standing’ proposal to address the sovereign bank nexus?

13-09-2018

Further to the adoption by the Commission of a proposal for a Regulation on sovereign bond-backed securities (‘SBBS’) on 24 May 2018, this briefing outlines the main purposes of this “enabling regulatory framework” for the development of SBBS. SBBS have been presented by the Commission as a market-driven initiative. By removing regulatory obstacles that have hindered its development, this enabling framework would put SSBS to a market test. In that context, SBBS has been portrayed by Commission Vice ...

Further to the adoption by the Commission of a proposal for a Regulation on sovereign bond-backed securities (‘SBBS’) on 24 May 2018, this briefing outlines the main purposes of this “enabling regulatory framework” for the development of SBBS. SBBS have been presented by the Commission as a market-driven initiative. By removing regulatory obstacles that have hindered its development, this enabling framework would put SSBS to a market test. In that context, SBBS has been portrayed by Commission Vice President Dombrovskis at the May 2018 structural dialogue as “a proposal on its own”. This briefing focusses also on significant differences between the original ESRB proposal and the concept of SBBS, which no longer suggests institutional changes nor amendments to the existing regulatory treatment for sovereign debts. Absent such ‘flanking’ measures to SBBS, the question is raised as to whether SBBS as proposed by Commission would be met by sufficient demand.

A framework for EU covered bonds

18-05-2018

The Commission proposed a legislative framework for covered bonds. The supporting impact assessment (IA) provided a coherent problem analysis and the corresponding set of objectives. The impacts analysis focused mainly on the costs and benefits of enhancing the Capital Markets Union potential. However, the IA did not assess the options in terms of their proportionality and did not check the subsidiarity or proportionality of the regulatory options.

The Commission proposed a legislative framework for covered bonds. The supporting impact assessment (IA) provided a coherent problem analysis and the corresponding set of objectives. The impacts analysis focused mainly on the costs and benefits of enhancing the Capital Markets Union potential. However, the IA did not assess the options in terms of their proportionality and did not check the subsidiarity or proportionality of the regulatory options.

External author

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Feasibility check: transition to a new regime for banks’ sovereign exposure

30-11-2017

This note presents the summaries of two papers requested in June 2017 by the ECON Committee to external authors on “Feasibility check: transition to a new regime for banks’ sovereign exposure”. It also presents some relevant EU institutions’ position on the subject.

This note presents the summaries of two papers requested in June 2017 by the ECON Committee to external authors on “Feasibility check: transition to a new regime for banks’ sovereign exposure”. It also presents some relevant EU institutions’ position on the subject.

Feasibility Check: Transition to a New Regime for Bank Sovereign Exposure?

20-11-2017

Excessive sovereign debt exposures of banks contributed to the gravity of the financial and sovereign debt crisis in 2011 and 2012, as well as to the slow and asymmetric recovery of European countries. Various policies that improve banks’ resilience were introduced in recent years, however the regulatory regime for the sovereign debt exposure of banks has not changed. We identify four criteria that a new regime for bank sovereign exposures should fulfil: (1) attenuate the home bias to the domestic ...

Excessive sovereign debt exposures of banks contributed to the gravity of the financial and sovereign debt crisis in 2011 and 2012, as well as to the slow and asymmetric recovery of European countries. Various policies that improve banks’ resilience were introduced in recent years, however the regulatory regime for the sovereign debt exposure of banks has not changed. We identify four criteria that a new regime for bank sovereign exposures should fulfil: (1) attenuate the home bias to the domestic sovereign, (2) break the doom loop, (3) avoid a flight-to-quality of assets, and (4) mitigate risk spillovers. We assess the implications for banks’ balance sheets for five policy proposals, based on simulations on a sample of European banks. We show that none of the proposals would fulfil all four criteria in the absence of a safe asset. We conclude that a new regime for bank sovereign exposure should be conditional on restoring the value of sovereign bonds as a safe asset.

External author

Yannik M. Schneider, Sascha Steffen

What should the ECB “new normal” look like?

15-11-2017

We review the set of arguments in favour of adding permanently balance sheet policies to the central bank toolkit. Balance sheet policies could support financial stability and complement the role of the standard – pre-crisis – policy to enhance macroeconomic stability. There are two major challenges though. The first one refers to the trade-off between effectiveness and distortions. Conventional interest rate policy aims at market neutrality whereas balance sheet policies target specific securities ...

We review the set of arguments in favour of adding permanently balance sheet policies to the central bank toolkit. Balance sheet policies could support financial stability and complement the role of the standard – pre-crisis – policy to enhance macroeconomic stability. There are two major challenges though. The first one refers to the trade-off between effectiveness and distortions. Conventional interest rate policy aims at market neutrality whereas balance sheet policies target specific securities or markets by construction. We argue however that under inefficient financial markets, balance sheet policies would be helpful at mitigating market imperfections. The second challenge relates to communication. If central banks have two instruments at hands – interest rate and balance sheet policies – they must make clear how they use them and for what purpose in order to avoid sending a confusing signal on the monetary policy stance.

External author

Christophe BLOT, Jérôme CREEL, Paul HUBERT (Sciences Po, OFCE)

Resources for the funding of the research fund for coal and steel

15-09-2017

The ECSC Treaty, which was concluded for a period of 50 years from its entry into force, expired on 23 July 2002. Accordingly, in the run-up to its expiry, and in view of the benefits which the coal and steel sectors derived from the ECSC research and technological development programmes, the European Council, in the resolution on growth and employment which it adopted in Amsterdam on 16 and 17 June 1997, determined that revenues from reserves outstanding at the expiry of the Treaty should be used ...

The ECSC Treaty, which was concluded for a period of 50 years from its entry into force, expired on 23 July 2002. Accordingly, in the run-up to its expiry, and in view of the benefits which the coal and steel sectors derived from the ECSC research and technological development programmes, the European Council, in the resolution on growth and employment which it adopted in Amsterdam on 16 and 17 June 1997, determined that revenues from reserves outstanding at the expiry of the Treaty should be used for a research fund for sectors related to the coal and steel industry.

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