Securitisations: turning poison into a remedy

European Parliament adopts new rules for reselling of debt claims - "We must stop rewrapping and rewrapping"

"We want to remedy what has been turned into poison", said Othmar Karas MEP, explaining the new rules for securitisations that the European Parliament will adopt today. Karas is Parliament's Rapporteur for the new set of rules.

"During the American subprime crisis, we saw how an overdose and lack of rules turned securitisations into a fire accelerant. Now we are setting new, clear and strict rules in order for securitisations to play a useful role", Karas said.

When banks wrap debt claims or other assets into tradable packages and resell them, this is called securitisation.

The core of the new rules are new capital and transparency requirements and a ban on re-securitisations. "We must stop rewrapping and rewrapping. Banks cannot rewrap bundles of securitisations into new packages and resell them", Karas said.

"We want securitisations to safeguard that risks are being borne by those who can bear them. They should give rise to new investment possibilities and make it easier for banks to give credit to businesses and families", Karas explained.

Today's vote confirms an agreement between Member States and the European Parliament reached in May.