Revitalising the securitization market for SMEs in Europe

May 26 2015


  • Andreas Jobst (IMF)

  • Massimiliano Rimarchi (EBA)

  • George Passaris (European Investment Fund)

  • Anna Bak (IMF)


The IMF has just put out a Staff Discussion Note on why it is important to give the SME securitization market in Europe a boost, and what it would take – in terms of regulatory reform, infrastructure development and possible official sector support – to ‘revitalize’ it. As it says, “a vibrant SME securitization market would be an important milestone on the road to an eventual Capital Markets Union”.

That is, we all agree, a consummation devoutly to be wished. However, there are many impediments on the way – including regulatory obstacles, fragmented debt enforcement and insolvency regimes, and the lack of harmonized credit information. All of these limit investor demand, and make it difficult for the securitization market to grow. There is also the legacy of the financial crisis – which (perhaps unfairly) gave securitization a bad name, despite the fact that the default rate of European securitization transactions backed by secured SME loans has been a derisory 0.1%.  

Anyway, there now seems to be a surge in support for securitization, and we are delighted that one of the authors of the IMF paper has agreed to talk us through his argument, and what policy initiatives can do in this area. Andy Jobst is a Senior Economist in the Fund’s European Department, where he covers the eurozone financial sector, monetary policy and macro-prudential surveillance. Before joining the IMF, he was the Chief Economist of the Bermuda Monetary Authority, and has worked previously at the FDIC and Deutsche Bank.

This is obviously not just a Washington preoccupation. The Europeans are also keen to boost securitization, and we are, therefore, delighted to have three distinguished respondents:

  • George Passaris, who is head of the securitization division at the European Investment Fund in Luxembourg, where he is responsible for the EIF’s credit risk enhancement of SME transactions throughout the EU;

  • Massimiliano Rimarchi, who is a policy expert within the credit market and operational risk unit of the EBA, working mainly on issues related to covered bonds and securitisation; and

  • Anna Bak, who is the manager for securitization at the Association for Financial Markets in Europe, based in London.

This is an important area – one in which London ought to be able to play a major role. But it is not going to be easy.