Europe is set to start using its "best practice" label developed under the Prime Collateralized Securities project by the end of 2012.
Ian Bell, the former head of European securitization at Standard & Poor's, will head the group of independent non-industry directors and industry professionals behind Europe's new project, said the Association for Financial Markets in Europe (AFME) and the European Financial Services Round Table in a press release today.
The PCS label is intended to be a simple way of communicating and identifying securitizations that meet predefined best practice standards with regard to quality, transparency, simplicity and standardization. The aim of setting these standards is to increase the depth of the securitisation investor base so as to allow for an increase in primary issuance and improve secondary market liquidity.
The PCS will label on a deal-by-deal basis and will only be eligible to asset classes that have performed well throughout the financial crisis and are in direct significance in improving the real economy. These eligible classes include European auto loans and leases, residential mortgage loans, loans to small and medium enterprises, consumer loans and credit card receivables. However, there are also specific asset classes that are ineligible to for the label, including CMBS, CDOs, synthetic securitizations, resecuritizations and residential mortgages that do not meet defined quality criteria.
Bell said in the release that the PCS initiative has been fully funded for its first two years of operations from over 30 institutions in the industry. "PCS demonstrates the seriousness of the industry's intent to establish a vibrant, yet robust European securitization market capable of funding the growth Europe so badly needs," he said.
