EU securitisation does little for smaller companies, warns BoE official
European Union efforts to prepare markets for securitisation in the fallout of the financial crisis are unlikely to support smaller companies looking to access funding for growth, according to a senior Bank of England (BoE) official.
The BoE and European Central Bank (ECB) have driven securitisation efforts, which involves the creation of debt, in order to help companies to raise funds despite banks cutting back on lending.
"We should not oversell what this market can do for small and medium-sized enterprises," said David Rule, executive director of prudential policy at the BoE told a conference.
"I suspect it can't do much but that does not mean it's not a good thing to be doing," he added.
Ultra-cheap funds from the central bank have been criticised by some for weighing on securitisation as a source of money.
However, Rule said the higher capital charges on covered bonds, a rival asset, would relieve pressure and emphasised that the treatment of the sector had improves as policymakers continued to drive market-based finance.
Rule concluded that there was a "petty good consensus" that cutting capital charges on securitised debt at banks and insurers was the the way forward in Europe.