Over the past few years PMI Europe has worked to establish its presence throughout Europe and now the group plans to lobby for the use of mortgage insurance on a continental European platform. Christian Pierotti, PMI Europe's first head of governmental affairs, will be undertaking the initiative.
The creation of this new position reinforces PMI's development of European operations. The new role recognizes the European potential to embrace credit risk management techniques such as residential mortgage insurance. PMI said that the ultimate effect of this lobbying effort is to make fully available in Europe what is widely used in the U.S., Australia, Canada and Hong Kong.
Pierotti will work to inform European regulators and parliamentarians of PMI Europe's role in residential mortgage finance and be responsible for developing PMI Europe's regulatory affairs strategy and directing all governmental lobbying efforts at both the EU and national levels. Pierotti's initial objective will be to help establish appropriate national capital relief policies for banks that transfer risks to insurance vehicles, primarily within major EU economies.
Tony Porter, managing director and chief operating officer of PMI Europe said the premise behind this first objective is that the Basle Accord is not a perfect document and still needs flushing out particularly on what defines a risky mortgage. "Basle doesn't prescribe what risky mortgages are and where high capital charges should start," said Porter. "We can help regulators think around these issues." Porter added that banks can approach the varying risks associated with different mortgages products through insurance and that should entitle these banks to some level of capital relief.
Pierotti will also be lobbying for the expansion of covered bond loan eligibility. "Covered bonds are moving through Europe but to reach a triple-A rating they are structured conservatively," said Porter. "More mortgages can be funded - at advantageous triple-A rates - through the use of mortgage insurance. This would obviously be good for banks, but also for the lower deposit, high LTV borrower."
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