Newsmakers | United Kingdom
After a bumpy ride, the UK’s candidate, lord Jonathan Hill, has been confirmed by the European Parliament as commissioner for financial stability, capital markets and financial services. Choosing a Briton was bound to be controversial, given the City of London’s predominance in finance and the readiness of many European parliamentarians—especially Socialists and Greens—to blame the recession on Anglo-Saxon capitalism.
During his first grilling, Lord Hill was compared to Hugh Grant—praised for his charm but criticized for a “fundamental lack of substance.” Second time round he fared better. His glowing vision of a completed banking union’s bringing stability and of Britons’ voting to stay within a reformed EU won applause. Perhaps Hill’s most significant statement was that he would seek to develop Europe’s securitization market—especially relevant, given European Central Bank president Mario Draghi’s talk of the ECB’s buying asset-backed securities so that a reinvigorated market for these instruments would enable banks to start lending again.
Ian Falconer, partner with law firm Freshfields Bruckhaus Deringer, notes: “The function of securitization is to provide access to capital markets to fund assets—and this is critical in the face of reduced bank lending capacity as eurozone banks reconstruct and repair their balance sheets.”
A key element of securitization is that it funds assets to maturity, thereby relieving banks of the need to borrow short for longer-term lending, which puts pressure on their balance sheets. Falconer believes such pressures have “deferred banking regulation reforms for fear of their impact on still-fragile eurozone banks as they remain locked in a death embrace with the sovereigns whose debt they hold.” But with the securitization market’s role in funding economic activity now recognized by both the relevant commissioner and the ECB, its revival could kick-start growth.
