{"id":45243,"date":"2025-07-29T14:16:23","date_gmt":"2025-07-29T14:16:23","guid":{"rendered":"https:\/\/www.newsbeep.com\/us\/45243\/"},"modified":"2025-07-29T14:16:23","modified_gmt":"2025-07-29T14:16:23","slug":"villain-of-2008-crisis-gets-new-life-in-europes-push-for-growth","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us\/45243\/","title":{"rendered":"Villain of 2008 crisis gets new life in Europe\u2019s push for growth"},"content":{"rendered":"

In the wake of the 2008 financial crisis, the role of villain partly fell on securitization, turning it into a long-term pariah in Europe.<\/p>\n

Since then, the market of packaging different loans into products to sell to investors has weakened, made so costly by post-crisis rules that outstanding debt has almost halved from the 2009 peak of \u20ac2.3 trillion ($2.7 trillion). <\/p>\n

Now, it\u2019s being cast as a potential hero for a troubled Europe facing trade tariffs, increased defense spending needs and bloated budget deficits.
\u201cEurope needs growth \u2014 and growth needs investment,\u201d the European Union\u2019s finance chief, Maria Luis Albuquerque, told Bloomberg. \u201cTo mobilize capital at scale, we must use every tool available.\u201d<\/p>\n

The pitch is cheaper funding for lenders, which could cut borrowing costs for industry and consumers, broader investment opportunities for insurers, as well as more income for advisors and traders who\u2019ll keep the market flowing once it takes off.<\/p>\n

\"ETLive Events
Loss of Trust
It\u2019s a tough sell in some quarters. The market for pooling loans boomed before the 2008 financial crisis, but alongside that came a sharp drop in quality control. When the house of cards came down, the results were massive losses, economic turmoil and a collapse of trust in the system.
In June, the European Commission<\/a> unveiled proposals to make it cheaper for banks to issue securitizations, both in terms of the cost to balance sheets and the paperwork involved. It\u2019s also looking at easing regulations for insurers who want to invest. Europe hasn\u2019t set out any market growth targets for its reforms, but some investors have predicted trillions of euros of investment could be unlocked.
\u201cWith better rules, we can make Europe\u2019s securitization market a driver of prosperity \u2014 not complexity,\u201d Albuquerque said last week.\"Bloom.\"Bloomberg
Slow Progress
The Brussels finance lobbying community \u2013 and their bosses in London, Paris, Frankfurt and New York \u2013 went into 2025 with high hopes of an imminent watershed moment, several industry insiders and officials told Bloomberg News.<\/p>\n

But despite the commission\u2019s push, the redemption story has further to go. Securitization still needs to win over politicians and navigate a complex path to legislation. That means many months of intense lobbying and horse-trading.<\/p>\n

\u201cWe\u2019re really just firing the starting gun,\u201d said Shaun Baddeley, managing director of securitization at finance lobby group AFME. \u201cA lot can change between the commission\u2019s proposal and the end game.\u201d<\/p>\n

Markus Ferber, a European Parliament member for Germany attached to the center-right European People\u2019s Party, says some lawmakers, particularly on the left, remain skeptical of the asset class.<\/p>\n

\u201cThe file will be quite controversial in the parliament,\u201d he said. \u201cThat will certainly make finding a compromise difficult, so I doubt it will be a swift procedure.\u201d <\/p>\n

Aurore Lalucq, chair of the parliament\u2019s Economic and Monetary Affairs Committee, who sits with the Progressive Alliance of Socialists and Democrats group, has already voiced her opposition.<\/p>\n

Better Finance, which represents private investors and savers, has also come out against it, saying it\u2019s a \u201cgamble on financial stability.\u201d<\/p>\n

Finance Push
For the finance industry, securitization is just one element in a wider push to get Brussels to loosen the reins, arguments that are amplified by complaints about US banks having an unfair advantage because of EU regulation. While the European securitizations market declined sharply after the financial crisis, the US market grew from $11.3 trillion in 2008 to $13.7 trillion at the end of 2023. <\/p>\n

Banks want it \u201cto reduce their balance sheet, and capital charges,\u201d said Karel Lannoo, head of European policy think tank CEPS. He added that the industry is less enthusiastic about aspects of the EU\u2019s capital markets push which could curtail inducements or limit fees. <\/p>\n

Industry insiders and watchers agree that the commission package is by far the EU\u2019s meatiest attempt to address structural issues in the market. And reports of impending changes for insurers are also seen as broadly positive.<\/p>\n

But there\u2019s disappointment too about what some see as missed opportunities. <\/p>\n

Banks are concerned the measures don\u2019t do enough to incentivize them to hold other lenders\u2019 securitizations on their balance sheets, something they must do in their role as market makers who buy and sell securities, ensuring liquidity.<\/p>\n

AFME, which represents a wider cross section of finance, has criticized several aspects of the plans, including \u201cdisproportionate penalties\u201d for investors who fall foul of due diligence requirements. <\/p>\n

While lobbyists will be pushing for improvements, regulatory opposition may pull things in the opposite direction. <\/p>\n

Insurance Money
Insurers are seen as a critical source of demand for securitizations, since they have the financial firepower to buy big. Their overseer, EIOPA, remains skeptical about any reforms that would cut the capital requirements for insurers holding the asset class. <\/p>\n

Patrick Hoedjes, head of EIOPA\u2019s Policy and Supervisory Convergence Department, told Europe\u2019s finance committee last month that the regulator would have a \u201cstrong concern\u201d about any attempts to change requirements.<\/p>\n

Another question is whether insurers even want the assets. An EIOPA official told Bloomberg News insurers would be more keen to buy assets with longer duration, to match their liabilities.<\/p>\n

Linking securitization to Europe\u2019s economic revival will be critical to the Brussels debate. <\/p>\n

The idea that insurers may not even want to buy the assets, and that other initiatives are more important, will make the zero-to-hero narrative harder to sell. Some policy makers argue the true status is somewhere in between.<\/p>\n

\u201cSecuritization is not a silver bullet, but it can play a role in supporting Europe\u2019s economic development,\u201d said Verena Ross, chair of Europe\u2019s markets supervisor ESMA. \u201cWhen used appropriately and maintaining a focus on investor protection, it can help to share risk between banks and other actors in the capital markets.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"In the wake of the 2008 financial crisis, the role of villain partly fell on securitization, turning it…\n","protected":false},"author":2,"featured_media":45244,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[36],"tags":[35813,35819,28,101,35815,13390,33188,35814,35818,35816,35817,5103],"class_list":["post-45243","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-2008-crisis","tag-bundled-loans","tag-business","tag-economy","tag-europe-growth","tag-european-commission","tag-european-economy","tag-loan-growth","tag-loan-rates","tag-loans-in-europe","tag-us-2008-loan-crisis","tag-world-economy"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/45243","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=45243"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/45243\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/45244"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=45243"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=45243"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=45243"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}