Global ABS: Regulators Aim for Sustainable Growth

The ultimate aim of the European Commission’s (EC) different regulatory initiatives is not to throw out the baby with the bathwater but to ensure that the “baby is able to grow on two solid feet and not create havoc,” said Nadia Calvino, deputy director general at the EC directorate general internal market and services.

She was addressing attendees at the Information Management Network’s and the Association for Financial Markets in Europe’s (AFME) Global ABS 2012, which is being held in Brussels this week.

Calvino said that sound and sustainable growth is at the heart of the EC’s agenda despite the immediate challenge of the sovereign crisis. She added that the Commission’s financial goals are in line with the Group of Twenty Finance Ministers and Central Bank Governors (G-20).

In her speech, Calvino enumerated the different regulatory reform efforts in Europe, including the EC publishing proposals for bank resolution which is a “key piece of the puzzle” of financial regulation.

Although these regulatory efforts have mainly focused on financial institutions to ensure that they are financing  Europe's real economy, there has also been reform directed toward the general financial sector and the role that the financial services industry plays, Calvino noted.

Calvino cited the EC’s green paper on shadow banking, which the Commission has previously described as an increasing area of non-bank credit activity.

She also expressed her views on the European Central Bank's loan level data warehouse, which promotes the standardization and a “better comparison” between financial products.

In terms of AFME’s and the European Financial Services Round Table's (EFR) newly launched Prime Collateralized Securities (PCS) product (see story), Calvino said she agrees in principle with these types of initiatives. But, she noted that PCS should not be a closed shop that acts with a lack of transparency and there should be the appropriate management of conflicts of interest.

Calvino also mentioned  the EC’s Solvency II directive, its CRD IV package and the Markets in Financial Instruments Directive (MiFID). The MiFID is a European Union (EU) law that offers a harmonized regulatory environment for financial services across 30 European states. MiFID is considered a key element of the EC’s financial services action plan that has 42 measures that regulates how EU financial service markets should operate.

The aim of these regulations is to dispense risk in a safe manner. If these different regulatory efforts are able to restore investor confidence, it will be a good step in the right direction, Calvino said. The Commission, Calvino said, just wants to ensure that “stable growth is back in Europe.”