. creating this level playing field will most likely lead to a more balanced and diversified financial system, i. e., with more options for savers and borrowers. this competitive environment is key to maintaining financial markets in constant improvement, characterized by innovation that responds to the insufficiencies of the existing instruments. ideally, restrictions to the development of any type of finance should always be clearly justified on efficiency grounds. along the way, the problems faced by the main source of funding in europe ( i. e., banks ) should not be forgotten. banks do not seem to have liquidity problems ; enough steps have already been taken by the eurosystem to provide liquidity, in such a way that a typical balance of payment crisis was avoided in several countries. but investors are suspicious about the reported balance sheet of banks. thus, the steps towards the banking union, the major leap europe has given to deepen financial integration, including the underway comprehensive assessment, must be credible. losses should be recognized so as to definitely resolve the uncertainty and bring back investors. once this is done overly cautious capital requirements ought to be relaxed. in europe, banks ’ assets account for the bulk of financial wealth. and it is expected that banks will continue for a long time to be the most important intermediaries between borrowers and savers. in fact, it is not easy to change from a bank - based bis central bankers ’ speeches economy to a capital market - based economy nor it is clear that this is the best thing to do. for instance, european firms will have to go through several changes before such shift ( if any ) occurs, namely in terms of size, access to information, transparency ; in general a different corporate culture will be necessary. forcing a shift may be counterproductive. at the same time, more prudent transformation ratios ( say, loans to deposits ), coupled with a lower capacity of banks to attract savings would imply, at least in some countries, that the ability of banks to lend would decrease ; but their willingness would not necessarily decrease, since they keep the advantaged standpoint to screen and monitor loans. this means that the implied gap might be filled by actors ( insurance companies, pension funds ) with greater capacity to attract savings although with limited capacity to lend directly. securitisation of bank loans can be the privileged vehicle through which the gap is filled. securitisation is also key when one thinks at impediments to capital relief and

effects, which should warrant a more reasonable regulatory treatment, was overlooked ; in at least two ways. first, abs sales are, from an aggregate perspective, a better way for banks to deleverage vis - a - vis credit supply restrictions. in fact, if many banks deleverage simultaneously by restricting credit, this will have an aggregate impact on the total supply of credit, which might end up in a credit crunch. in contrast, deleveraging through securitisation does not mechanically induce a credit supply restriction, even if many banks do it simultaneously. in fact, deleveraging through securitisation could provide banks with enough funding and capital to enable them to increase lending, or, it could help transforming zombie banks into active players in the economic recovery. second, there is considerable home bias in the loan portfolio of banks whereas diversification of assets and reserves across the euro area, something which is achievable through cross - border purchases of abs, could act as an absorber of asymmetric shocks. bis central bankers ’ speeches all this suggests that the next regulatory steps could justifiably give a more favourable treatment to abs. there seems to be a consensus among european authorities and market participants that simple, standard and transparent securitisations should have a beneficial regulatory treatment. speed is now warranted, also given the recent ecb announcement of an abs purchase programme, so as to decisively eradicate regulatory uncertainty. this recent ecb announcement on the launch of an abs purchase programme, although decided taking into account monetary policy considerations, is also a game changer in the reactivation of the abs market. it reduces the stigma carried from the aftermath of the financial crisis and it contributes decisively to put securitisation in the policy agenda. the inclusion of mezzanine tranches in the programme can effectively result in capital relief for originators. also, the existence of a european guarantee scheme ( possibly using european funds and with involvement of a supranational institution like the eib / eif group ) to help originators achieve a significant risk transfer at an affordable price can be justified under the current adverse market conditions. it is also important to stress that the focus on abs based on sme loans may be counterproductive. abs based on residential mortgages represent the bulk of abs issuance while capital relief associated with sales of these abs has also the potential to generate new sme loans. the above steps depend on us as policy - makers