The controversial financial instruments are finding favour again as policymakers switch priorities from stability to growth.
ADVERTISEMENTGreen securitisations could boost environmental lending by hundreds of billiions of euros per year, France’s central bank governor said today (4 September).
The complex and controversial loan packages – whose collapse is often seen as triggering the 2008 financial crisis – have found favour with EU policymakers once more as the focus switches from safeguarding stability to boosting economic competitiveness.
The structured products “could boost banks’ capacity to finance green projects by several hundred billion euro a year,” François Villeroy de Galhau told an event in Brussels, suggesting there could be a common issuance platform or a public guarantee to stimulate the moribund market.
Banks argue that securitisation allows them to package and re-sell loans so they can clear their balance sheets for further investment – but, in 2008, the assets became seen as toxically dangerous, leading financial markets to freeze.
But some – including EU finance ministers who meet in the Eurogroup – believe the regulatory curbs imposed in response may now need to be trimmed.
With massive investment also needed to curb climate change, some also believe that could focus on lending to green projects such as wind farms or energy-efficient homes.
Europe should also pursue reforms to secure more venture capital, centralised supervision of capital markets, and a unified ledger based on bitcoin-style distributed ledger technology to modernise the payments system, Villeroy de Galhau said.
The remarks come at a key stage in the EU political cycle, with European Commission President Ursula von der Leyen set next week to announce portfolios for her top team of senior officials.
With the Ukraine war and a moribund economy, the direction of travel is already clear, Sean Berrigan, the EU executive’s most senior financial services official said – with policymakers open to hearing about boosting economic growth rather than avoiding a repeat of 2008.
"It used to be that I can walk into a room in the Commission and say, I need this for stability reasons, and that was all I needed to say ... this is not the case anymore,” said Berrigan, who is Director General at the Commission’s financial services department DG FISMA.
"As growth and competitiveness move to the centre, people in our business will have to start justifying what we're doing in a more particular way.”
Centralising Brussels’ oversight of financial markets wouldn’t necessarily be enough to boost investment, he said, noting that a similar reform in the banking sector had not delivered an integrated market.
