ISE given key role to monitor debt securitisations standards in Europe

The ISE has been appointed to a key role in a new European initiative designed to provide the benchmark standard for the asset backed securities market.

The new initiative is led by an organisation called Prime Collateralised Securities [PCS]. PCS is an industry-led, non-profit initiative set up to develop a label for high quality securitisations. The Board of the PCS includes some of the most senior figures in European finance including former executives of the ECB and the European Investment Bank (EIB).

The ISE is one of three screening partners appointed by PCS to check documentation relevant to the screening process. The PCS label will be awarded to asset backed securities that comply with published standards that are indicative of simplicity, asset quality and transparency and reflect some of the best practices available in the European securitisation market. A total of €126.9 billion of securitised debt products were issued in Europe in the first half of 2012.

The PCS initiative comes at a time when access to securitisation markets for issuers (corporates and banks) is increasingly important to overcome funding shortfalls which will stimulate Europe’s broader economic recovery. Asset backed securities can be an important instrument, especially as they do not use up the same credit line capacity as other investments, such as corporate and covered bonds.

Deirdre Somers, Chief Executive of the ISE, said, “The ISE is delighted to have been chosen as a screening partner for PCS. As a constant advocate for greater transparency within the structured product markets, we are confident that the PCS initiative, alongside more positive regulatory signals from Europe’s policymakers, will provide a significant boost to Europe’s securitisation market, which is so important to fund economic growth across the European Union.”

Ian Bell, PCS’s Head of Secretariat, commented, “The PCS initiative has received overwhelming support from Europe’s key institutions, such as the European Central Bank and I am delighted with the level of experience on the PCS Board, which will be led by Francesco Papadia. Europe’s securitisation market is a necessary component of funding the growth that Europe so badly needs and the PCS label will go some way towards providing investors with the reassurance they need.”

Newly appointed PCS Chairman, Francesco Papadia, added, “The PCS label will bring quality, transparency and standardisation to the market, which will deepen the securitisation investor base in Europe and, in turn, improve overall liquidity. Europe needs a healthy securitisation market and we are confident that this initiative, alongside regulatory changes, will revitalise the market as a source of funding for the real economy.”

Notes to editors

PCS label

The PCS label, awarded by Prime Collateralised Securities (PCS), identifies asset backed securities that comply with a set of published eligibility criteria that are indicative of simplicity, asset quality and transparency and reflect some of the best practices available in the European securitisation market. Awarded at the request of financial institutions that issue asset-backed securities, the PCS Label focuses on securitisations that fund the real economy and are compatible with good liquidity. In awarding the Label, PCS bases its decision on information provided directly and indirectly by the originator of the securitised assets.

About PCS

The governing body of the PCS initiative is the Board of the PCS Association, led by Francesco Papadia, the former Director General for Market Operations at the European Central Bank. The objective of the PCS initiative is to reinforce asset backed securities as a sustainable investment and funding tool to strengthen the European economy is in the awarding of the PCS Label to specific asset-backed securities.

About Francesco Papadia, Chairman of PCS

Francesco Papadia was, between 1998 and 2012, Director General for Market Operations at the European Central Bank. Before that he was Deputy Head of the Foreign Department and Head of the International Section of the Research Department of Banca d´Italia.

He also worked as Economic Advisor at the European Commission. Mr. Papadia has a degree in Law from the University of Rome and attended postgraduate courses in Economics and Business at the Istituto Adriano Olivetti in Ancona and at the London Business School.

Note on funding requirements

Recent estimates show that €650 billion of senior unsecured and covered bond funding are expected to mature in 2012 for European banks; for sovereigns, funding of over €900 billion will be needed and that an additional €1.5 – €1.9 trillion of funding will be needed to power any growth. Sources: Bloomberg and BAML Global Research December 2011, Standard & Poor's May 2012.