The Irish Stock Exchange has been appointed to a key role in a new European initiative designed to provide the benchmark standard for the asset backed securities market. The new initiative is led by an organisation called Prime Collateralised Securities [PCS]. PCS is an industry-led, non-profit initiative set up to develop a label for high quality securitisations. The Board of the PCS includes some of the most senior figures in European finance including former executives of the ECB and the European Investment Bank (EIB).
The ISE is one of three screening partners appointed by PCS to check documentation relevant to the screening process. The PCS label will be awarded to asset-backed securities that comply with published standards that are indicative of simplicity, asset quality and transparency and reflect some of the best practices available in the European securitisation market. A total of €126.9 billion of securitised debt products were issued in Europe in the first half of 2012.
The PCS initiative comes at a time when access to securitisation markets for issuers (corporates and banks) is increasingly important to overcome funding shortfalls1 which will stimulate Europe’s broader economic recovery. Asset Backed Securities can be an important instrument, especially as they do not use up the same credit line capacity as other investments, such as corporate and covered bonds.
Deirdre Somers, Chief Executive of the ISE, said, “The ISE is delighted to have been chosen as a screening partner for PCS. As a constant advocate for greater transparency within the structured product markets, we are confident that the PCS initiative, alongside more positive regulatory signals from Europe’s policymakers, will provide a significant boost to Europe’s securitisation market, which is so important to fund economic growth across the European Union.”
Ian Bell, PCS’s Head of Secretariat, commented, “The PCS initiative has received overwhelming support from Europe’s key institutions, such as the European Central Bank and I am delighted with the level of experience on the PCS Board, which will be led by Francesco Papadia. Europe’s securitisation market is a necessary component of funding the growth that Europe so badly needs and the PCS label will go some way towards providing investors with the reassurance they need.”
Newly appointed PCS Chairman, Francesco Papadia, added, “The PCS label will bring quality, transparency and standardisation to the market, which will deepen the securitisation investor base in Europe and, in turn, improve overall liquidity. Europe needs a healthy securitisation market and we are confident that this initiative, alongside regulatory changes, will revitalise the market as a source of funding for the real economy.”
1 Recent estimates show that €650 billion of senior unsecured and covered bond funding are expected to mature in 2012 for European banks; for sovereigns, funding of over €900 billion will be needed and that an additional €1.5 – €1.9 trillion of funding will be needed to power any growth. Sources: Bloomberg and BAML Global Research Dec 2011, Standard & Poor's May 2012.