UK Regulator: “Securitisation would help small and medium-sized companies”

Regulators around the world continue to be coming to their senses about the benefits (actually the necessity) of securitisation in the global credit markets.  Now it seems that some of the politicians are wading into these formerly forbidden waters.

This past week found the British Chancellor George Osborne touting a new UK Government sponsored loan guarantee program for small and medium-sized enterprises (“SME’s).  He suggested that the program would be aimed at enhancing access to credit for the important middle market and that the features of the program could look similar to National Loan Guarantee Scheme which was first proposed by the Cameron Government in 2008.  That program would have established a government guarantee of up to 75% of principal for loans covered by the program.  Sounds a lot like “financial engineering” to us!

A Reuters article this week contained one telling quote attributed to Kevin Ingram, a partner in the capital markets practice at Clifford Chance.  Mr Ingram said “Securitisation has always been a very useful, if not fundamental, tool to recycle capital in the economy”.

How true and not only as it applies to small and medium-sized companies.  The same principle or “need to recycle capital” is the driving mechanism behind growth and prosperity for all originators of financial and commercial assets.  That principle applies just as evenly to JP Morgan, Barclays and Deutsche Bank, as it does to a small consumer electronics company or a community bank.

As we have said before, it is time to take the shackles off the structured finance markets.  Monitor the hell out of it if you want but regulators and law makers must stop blaming the financial engineering for bad behavior.  Securitisation IS the answer!

About markferraris
Managing Principal Orchard Street Partners LLC

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