ECBC unveils SME hybrid proposal

摘要

A new breed of secured bonds could soon see the light of day if European regulators embrace a proposal put forward by the European Covered Bond Council and backed by the IMF last week. Answering the European Commission's consultation on a Capital Market Union, the ECBC has laid out its plan to create a new instrument backed by SME collateral and possibly other assets linked to the real economy, as previously reported by IFR. The plan looks to combine covered bond and securitisation features to make better use of collateral whose potential has not been maximised in the two separate formats, and tackle both the real economy's and the capital markets' needs, the ECBC and the IMF said. The new vehicle, called European secured notes (ESN), would offer dual recourse to a cover pool and to the issuer in case of financial difficulty, as well as tranching of credit risk and, potentially, off-balance sheet treatment to free-up space for more lending, the ECBC said.