Recent U.S regulatory changes can further disrupt the European securitization market. The latest source of concern are the Securities and Exchange Commission's proposed changes to the disclosure requirements applied to ABS offerings under Rule 144A or Regulation D.
There is danger that the rules would fail to take into account industry practices and legal structures used outside the U.S., according to the Association for Financial Markets in Europe (AFME) in a written statement.
A number of European regulators and other authorities have recently put forward proposals related to ABS disclosure and reporting standards. Specifically, detailed proposals have been published by the Bank of England (BoE) and the European Central Bank (ECB). These proposals are framed as eligible collateral requirements to access central bank financing and it is expected that they may become market standard for all European securitizations.
At the moment, AFME said, there are important differences between the disclosure and
reporting requirements contemplated by the SEC proposed rules and the BOE and ECB proposals.
For instance, foreign issuers that would be complying with the SEC proposals might conflict in certain circumstances (particularly in the context of deals backed by consumer assets) with bank secrecy and/or data protection laws that are in place in some European jurisdictions.
Industry estimates — calculations made by AFME and the Securities Industry and Financial Markets Association based on Dealogic data — suggest that up to 25% of total issuance of European originated securitizations was offered under Rule 144A before the financial crisis.
More recently, the Rule 144A regime has played an important role in the success of U.K.-originated RMBS issues and, as such, has helped in raising the market's confidence levels.