Tuesday 27 September 2016

EU to row back on its tough post-crash bank rules

Huw Jones

Published 01/10/2015 | 02:30

European companies tap banks for up to 80pc of the funds they need to grow
European companies tap banks for up to 80pc of the funds they need to grow

The European Union will ease capital rules it imposed on banks and insurers since the financial crisis to help markets raise more funds for reviving sluggish economic growth.

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European Commission financial services chief Jonathan Hill announced yesterday his "action plan" to put in place the building blocks of "capital markets union" or CMU by 2019.

European companies tap banks for up to 80pc of the funds they need to grow and Brussels hopes its planned reforms will switch some of this heavy lifting to markets.

"I want to knock down barriers to make it easier for capital to flow freely across all 28 member states," Mr Hill said in a statement. Early initiatives include making it easier for banks to sell high quality securities based on the pooling of loans like mortgages - known as securitisation - to institutional investors.

He also wants to encourage insurers to invest in infrastructure like roads and digital networks by cutting their capital charges on such investments.

It would be the first instance of regulators rowing back on regulation introduced during the financial crisis in a sign of how policymaker concern has switched to reviving growth.

Reviving Europe's securitisation sector to pre-crisis levels would raise €100bn to €150bn, the European Commission said.

Regulators elsewhere in the world have not said they will also cut capital charges on banks that originate securitized debt in their jurisdictions.

Securitised debt based on low quality US home loans became untradable in 2007, helping to spawn the crisis. Mr Hill said the EU measure will focus on high quality loans to create "simple, transparent and standardised" debt.

His other "quick wins" include making it easier and cheaper to issue bonds and shares.

(Reuters)

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