With the intention of promoting greater issuance and encouraging investment in a more robust market for asset backed securities, Europe's new regime of simple, transparent and standardised ("STS") securitisations has had a tentative start since the European Union's regulations were ushered in at the beginning of this year.
Uncertainty on a number of fronts, in particular regarding certain technical aspects of complying with the new criteria has to some extent compounded the difficulties in meeting the complex and onerous certification and reporting requirements required to gain the STS seal of approval. The more beneficial capital treatment for banks, funds and other investors such as insurance companies, some of whom are currently priced out of the securitisation sector in Europe, should improve pricing levels and funding costs. However, meeting the complex criteria required for STS qualification is burdensome.
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