Discussions continue regarding the European Union's growth initiative, now expected to reach E100 billion (US$112 billion), mostly via increased investments in Trans-European networks and major research and development projects. And at the suggestion of Italy, which currently holds the EU presidency, securitization is increasingly likely to perform some function within the final proposal package.
The European Investment Bank (EIB) is heading the growth plan. Italy proposed that the EIB buy private banks' infrastructure loans and repackage them as bonds, using the new capital generated to back new loans.
At this stage, the EIB has not decided what specific role or in what capacity securitization will be used in the final stages of the initiative. However, a spokesman with the EIB said that, outside of the initiative, the bank is accustomed to using securitization as a funding option.
"At this point we are not completely familiar with how securitization will be used but at the EIB, we have used securitization in a number of ways," said the spokesman.
The bank uses securitization as a substitute for loans made primarily to small and medium-sized companies throughout the European Union. The EIB also uses securitization as a regular treasury investment and takes it on as a security. "Our target really depends on growth objectives developed by the European Commission policy," said the spokesman.
At the moment, the EIB is targeting Portugal as part if its finance objective, and will consider securitization as a means for funding projects in the country. The spokesman added that while the European Commission is committed to stimulating several EU economies, the use of securitization is more likely to be seen in countries that have established securitization laws, tried and tested in the past.