This report (written jointly by a Risk Control Director and co-authors from leading industry organisations) assesses cliff effects in European securitisation capital rules. Capital cliffs create distortions and exacerbate instability in financial stress periods. Regulators work to remove such cliffs when memories of financial crises are fresh. But cliffs may creep back as the authorities fine-tune earlier decisions and recollection of stress conditions fades. Right now, European regulators, aware of the region’s investment needs, are considering adjustments aimed at reviving the securitisation market. This study argues that those designing the new rules should take steps to identify and remove cliff effects from the framework.
Read the full paper here.
The study was co-authored by Michael Bennett (Arch Insurance (EU) dac), Georges Duponcheele (Munich Re), Tamar Joulia-Paris (IACPM), Véronique Ormezzano (VYGE) and William Perraudin (Risk Control)
