EU securitization sell-side to launch kitemark scheme

In its ongoing effort to reinforce the buyers' strike, the EU securitization sell-side to launch its labeling initiative.

Deals will only receive a label if they meet industry best practices as defined by the sell-side.

If best practices were defined by the buy-side, the deal would have to provide disclosure on the collateral backing the deal on an observable event basis.  Where an observable event for the collateral would include, but not be limited to, a payment, a delinquency, a default or a modification.

Buyers know that without disclosure on an observable event basis they do not know what they own should they buy a securitization.

Rather, buyers know that they are simply gambling and blindly betting.  The last time buyers did that was prior to the financial crisis and the result was losses that the Bank of England's Andrew Haldane estimated at greater than $4 trillion.

As reported by Financial News,

The Association for Financial Markets in Europe

An affiliate of the sell-side's lobby, the Securities Industry and Financial Markets Association.

is planning to launch its securitisation kitemark scheme,

Confirmation that the scheme is comes from the sell-side.

aimed at reviving Europe’s ailing asset-backed securities market, in the third quarter of the year. 

The Prime Collateralised Securities Initiative will identify products that meet industry best practice criteria and will be granted and maintained by an independent third party. 

The scheme is being designed to promote quality, transparency, simplicity and standardisation to help restore secondary market liquidity and boost the investor base for Europe’s dwindling securitisation market. 

Paul Burdell, secretary of The Market Group, which is helping develop an asset-backed securities data warehouse, welcomed the move. 

He said: “This effort, in parallel to the European Central Bank’s ABS Loan-level Initiative, is geared towards improving and facilitating due diligence for investors and attracting new potential buyers to this important fixed-income segment, which is vital for improving credit to the real economy.”...

Regular readers know that the only thing that will facilitate due diligence for investors and end the buyers' strike is disclosure on an observable event basis.

Unfortunately, neither the Prime Collateralised Securities Initiative nor the ECB's ABS Loan-Level Initiative is going to mandate disclosure on an observable event basis.