The European Union's Reviving of Asset Securitisation: From Financial Evil to Economic Saviour

Securitisation is a financial technique closely associated with the subprime crisis, after which the European market for asset-backed securities shrunk significantly. In recent years, however, there has been a renewed interest for this market in Europe, with the ECB and the Commission easing rules on securitisation. Thus, instead of ‘market forces’ constraining political choices, we observe a definite political attempt to revive private securitisation markets. We show that the post-financial crisis period constituted a window of opportunity during which financial firms having a material interest in securitisation could rally European policymakers to their cause: first, the economic recession, growing unemployment and social unrest pressed policymakers to ‘find solutions’; second, the austerity paradigm ruled out solutions such as public spending; and third, regulatory reforms (e.g. higher capital requirements) were used to argue that constrained bank lending required a move towards nonbank financing through securitisation as well as capital markets integration.