“I do not think we should expect with these proposals a strong recovery of securitisation,” said Oudea, who is chief executive of Societe Generale (SOGN.PA).
“I rather expect a reduction of the volume of securitisation in the next two to three years,” he told a news conference after meeting EU Financial Services Commissioner Jonathan Hill in Brussels.
A draft European Union law to kick-start the market for securities based on the pooling of loans such as mortgages, known as securitisation, is a central plank of the bloc’s plans for a capital markets union to raise more funds for economic growth.
But after an initial positive reaction from the banking sector, the plan seems to be hitting its first snags.
Securitised debt based on low-quality U.S. home loans became untradeable in 2007, helping to spawn the global financial crisis and tarnishing the sector in Europe, which is still only half its pre-crisis size.
Announcing the initiative at the end of September, Hill stressed that only “simple, transparent and standardised” (STS) debt would qualify for more lenient regulatory treatment.
But Oudea said he sees the new criteria set by the European Commission to issue safe securities as complex and detrimental to the market, at the least in the short term.
He was also critical of EU regulation that he said could hamper European banks and favour U.S. competitors.
The European fight against the “too big to fail” model, which caused taxpayers to pay the cost of rescuing banks during the euro zone financial crisis, has now reached the point that “the bigger you are, the more problems you have,” Oudea said, ruling out cross-border mergers of European banks in the near future.
Commissioner Hill told the European Parliament on Tuesday: “I feel our proposal provides a good basis to go forward. It has been welcomed by business and not just banks.”
The plan was supported by most EU lawmakers, but some of them are leery about rolling back regulation to revive a sector that sowed the seeds of the financial crisis.
A Green Party member of the European Parliament called for stricter safeguards, such as requiring banks to retain 20 percent of the securitised debt they create, rather than just 5 percent under current rules.