Consultant Zone

Reviving the asset backed securities market

The Association for Financial Markets in Europe (AFME) has launched its Prime Collateralised Securities (PCS) label aimed at reviving Europe’s ailing asset backed securities market.

The initiative will develop a badge for Asset Backed Securities (ABS) that comply with quality, transparency, simplicity and standardisation benchmarks to help restore secondary market liquidity and boost the investor base for Europe’s securitisation market, which remains virtually at a standstill.

In addition to prime residential first charge mortgages that comply with the basic standards, the PCS label will aim to cover other key asset classes, such as SME, consumer and auto loans.

The PCS seal of approval alongside appropriate due diligence and proper credit work on the part of investors will improve standards in the securitisation process and should re-assure all parties involved in the process, including regulators.

Whilst the launch of a kite-mark scheme will not necessarily stimulate the ABS market, it is a sign that quality over quantity is still uppermost in most people’s minds. We also think that process improvement, whilst the market is relatively quiet, makes sense. All we need now is an active trading market!