* EU's Barnier says wants to make it easier to securitise
* Regulation chief dismisses risk of second "subprime
* Brussels hopes softening rules can boost money flow
* Small businesses say Barnier plans "weak and vague"
(Recasts, adds comment from Barnier)
By Huw Jones and John O'Donnell
LONDON/ BRUSSELS, March 26 The European Union
will loosen rules on selling securitised debt, the bloc's
regulatory chief said on Thursday, giving a second chance to
products that triggered the worst financial crisis in a
The capital rules that make it expensive for banks and
insurers to create and buy such debt will be eased, said Michel
Barnier, the European Commissioner in charge of regulation,
dismissing any threat that such concessions would risk another
Packages of high-risk home loans, rebundled with credit-card
and other debt and then stamped as creditworthy, caused billions
of euros of losses for banks and triggered the financial crisis
of recent years.
Roughly seven years later, the European economy remains in
the doldrums, thanks in large part to banks' unwillingness to
lend. Banks have historically accounted for two-thirds of
corporate funding in Europe, double the level for U.S. peers.
Now policymakers across the region are seeking new streams
of credit for industry and believe that securitising or
repackaging debt, such as loans to companies, could provide the
"There is the low-quality securitisation. We have seen that
it has cost a lot of money, subprime and other examples,"
Barnier told reporters. "But there is also good securitisation.
We want to encourage good securitisation. We are not going to
invite a new subprime disaster."
By loosening the rules requiring banks, insurers or pension
funds to set aside large amounts of capital to cover risks from
investment in securitised debt, Brussels hopes, in part, to tap
the trillions of euros that Europeans have saved for retirement.
Barnier said that insurers had 84 trillion euros of assets,
while pension funds had 37 trillion euros.
Too little of this money, he said, was invested in 'unlisted
infrastructures', a reference to the small and medium-sized
companies who would find it easier to borrow if it was possible
to repackage and resell their debt.
The European Central Bank is also keen on re-starting
European Union banks have shrunk loan books by over $5.5
trillion, more than a tenth, since the global crisis of 2007-08,
choking off credit and forcing companies to find
"Good securitisation would help us to re-launch financing,
which many companies need," said Barnier.
WEAK AND VAGUE
His message is likely get a warm reception from banking
lobbyists. Investment banks from Wall Street and London, among
others, have long argued that securitisation is one of the few
ways to plug the gap left by banks retreating from lending.
Barnier was introducing plans to unlock market-based
financing and wean the European economy off its reliance on
banks for funding growth and investment in companies and
The EU's small-business lobby, UEAPME, welcomed plans to
ease capital rules for banks and insurers on securitised debt.
But he slammed Barnier's efforts to improve small-company access
to funds, saying they were weak, vague and depended too much on
lengthy consultations rather than speedy action.
Brussels' response, although much of its plan will take
years to implement, nonetheless marks a fundamental shift in
Politicians and small firms in countries such as Germany
have historically relied on regional banks to provide credit.
The formula still works for economically powerful Germany, but
the picture is different in Greece or Ireland.
"We have to focus on what's going to make a difference, and
... that's securitisation, which includes easing capital
requirements on insurers who want to invest in securitisation,"
said Simon Hills of the British Bankers Association.
"Easing Europe's heavy reliance on funding by banks has to
be done reasonably urgently," Hills said. "Otherwise, when the
next downturn comes, we will have the same problems with banks
There are other elements to Barnier's plan. Alongside easing
the rules on what pension funds can invest in, Barnier will try
to nurture new forms of finance, such as crowdfunding or online
Such schemes, he hopes, can boost growth and help to create
jobs. Addressing the issue of jobs and how fresh finance can
create them will also help Brussels' image ahead of elections
for the European Parliament in May.
"The trigger for employment and growth is financing," said
(Reporting by Huw Jones; Editing by Larry King)