The Information Management Network (IMN) and the European Securitization Forum (ESF) held a poll last week asking European market participants where to host the next Global ABS conference.

The two groups hinted at perhaps returning to the gathering's former home in Barcelona, Spain. However, going back will certainly not replicate the glory days of European securitization. In fact, it serves as a symbol of market retrenchment since the move to Cannes was made to accommodate a growing number of attendees.

This year's conference was a sobering affair that underlined the changing face of European securitization structures. But, the good news is that the industry - or what's left of it - is approaching this whole mess with a good heap of optimism.

While it's unlikely that the more exotic structures will survive this market upheaval, the raison d'etre for securitization has not gone away. However, industry players should brace for a smaller and slower paced market.

A participant at the Cannes gathering said to expect a "dumbing down" of structures. "Deleveraging of credit effectively means derisking of credit," he said. "That means better borrower quality, better LTV levels, so the products that we'll see coming forward will be the best we've seen in Europe."

However, the regulatory storm that is beginning to unfold could add pressure to any revival theories players might have.

While the industry is still standing by its desire for self-regulation, notable initiatives have been taken by the ESF and other European trade bodies to bring the market more in line with what government regulators are looking for.

But as the carnage of the financial turmoil begins to affect everyday constituents, it's likely that political forces will start to dramatically rein in the industry.

Over regulation is largely seen as a hindrance that could further stall the comeback of securitization activity. The problem is that the market had some ample warning where it could have readjusted itself before it fell so squarely under the regulators' scope. But it had not taken heed.

Gillian Tett, assistant editor at the Financial Times, led a panel at Cannes reminding bankers that at this time last year, regulators had already sounded the alarm bells but no action was taken, in spite of the several warnings made in various Financial Stability Forum (FSF) reviews.

This seeming indifference is a situation that will no longer be tolerated. Svein Andresen, secretary general of the Bank for International Settlements (BIS) and chairman of the FSF, speaking at the Tett-led panel said that even in the current market turmoil, European banks continue to drag their feet despite the fact that the FSF had asked for more robust risk disclosure nearly 10 months ago.

"This is highly detrimental and doesn't do anything to restore confidence," he said. "U.S. banks have implemented measures so I think European institutions should just get on with it."

What is certain about the market is that the old momentum is long gone. Hopefully, a more energized market will gain some traction soon and, maybe, by the time Global ABS 2009 rolls around, everyone will be at least a little more excited and motivated about securitizations.

(c) 2008 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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