The Association of German Banks called for new standards to restore confidence in securitization and help ease credit for Germany's small- and medium-sized businesses or SMEs.
KfW Bankengruppe said last year that securitizations with simple structures are still important for the credit supply of SMEs. The German state-sponsored bank emphasized that, first and foremost, it will be necessary for investors to regain trust in securitization before it can be utilized again.
"High-quality securitizations can play a vital role in securing the supply of credit for enterprises,” said Gunther Braunig, member of the managing board of KfW at a press conference in December. “This, in turn, is crucial for the economy to rebound and for avoiding a credit crunch, which would affect small and medium-sized enterprises most of all."
However, the recovery of SMEs is being hampered by the damage securitization suffered in the financial crisis. The Association of German Banks said a new quality of standards need to be introduced to reverse the damage.
The proposed new standard would include a new auditor for securitization and a regular system for reporting information to investors, the association said.
Banks must also offer mid-sized companies securitized debt "with the same credit standards, approval process and incentive measures as for credit they keep on their own balance sheets," the association said.
