ECB Warns on Synthetic SRTs as Europe Boosts Securitization (1)

The European Central Bank warned the region’s top rule setters against stoking the already booming use of synthetic risk transfers by lenders, as policy makers seek to unlock financing for the economy.

In an opinion regarding a European Union proposal for boosting securitization, the ECB said on Wednesday that “attention should be paid to the impact” of the amendments that concern synthetic transactions.

“Should issuance continue in line with current trends or even accelerate, the potential for financial stability risks to build up, and become substantial, could not be excluded,” the ECB said. “Continued risk monitoring is therefore needed.”

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