Participants at IMN's Global ABS conference recently suggested that quantitative easing is likely to ease off in Europe soon, coinciding with a potential tapering of programmes like the Europe-wide ABSPP and TLTRO in the UK. While the view that tapering should begin was widely held, panelists were uncertain about how government support for the securitisation market should - and would - be removed.

Ratul Roy, md, global CDO and European ABS strategy at Citi, commented that the effects of QE on the securitisation sector in Europe have, by and large, not been positive both in terms of issuance volumes and the ECB's conflicted approach. "I think in the context of other QE-style programmes, it has led to bad outcomes for ABS in Europe," he said. "If you want to spark ABS issuance, you need a clear mandate - while the ECB is buying assets, it is very restrictive; yet at the same time, it is also supervising various banks. There is a curious dichotomy between ECB as asset buyer and regulator."

The sentiment that it is time for government support to be eased off was supported by others, including Galen Moloney, securitised product strategist, Natwest Markets. He recommended a slow and steady approach, while expressing muted optimism about the boosting effect of STS.

He said: "There needs to be a gradual move from public to private. We're fooling ourselves if we think STS will spur the market on enough to fill the gap, should ABSPP end, given the impact of the new higher capital charges for banks. The choreography of the handover vis-a-vis the introduction of the new charges and the end of QE needs to be carefully managed."

Joost Beaumont, senior fixed income strategist at ABN AMRO, commented that while ABSPP may help some areas of the market, the Dutch RMBS sector is unlikely to recover any time soon, in part because of the competition from other funding methods. He pointed out though that should tapering occur, RMBS could come into play at a later date.

"From the Dutch perspective, there is a lot of competition to securitisation and some firms are switching to covered bonds, for example. Banks could obviously still switch to RMBS to diversify - however, when they need to refinance TLTRO 2 borrowings," he said.

Regardless, RMBS is struggling to compete with covered bonds in the Netherlands, and firms are turning to them, along with whole loans. Beaumont added: "I am not overly optimistic for the RMBS market in the Netherlands. Covered bond issuance has, in fact, taken over RMBS and some firms have indicated to switch from RMBS to covered bonds as well, such as NN Group. What is more, NN has taken over Delta Lloyd, which also was a frequent RMBS issuer. Meanwhile, the market has also got more activity in the whole loan space and there continues to be growth in the whole loan space."

In general, while STS and tapering of QE could help boost volumes in Europe, industry experts in Barcelona seemed to agree that while securitisation volumes may not necessarily return to pre-crisis levels, it should still be used as one of many tools in a company's funding inventory - as already demonstrated by some firms. Roy noted: "Diversification of funding methods is exemplified in auto ABS issuers. These use ABS as one funding tool, as well as a diverse range of other funding sources."

Volker Laegar, senior director, S&P Global Ratings, suggested that programmes like the ABSPP have generally been to the detriment of the European securitisation market. He added that it has resulted in a decline in both volume of issuance and a decline in spreads. He concluded that while the European government's role needs to change, he doesn't think there will be a sudden volte-face.

"I don't think the ECB is there to prop up the structured finance market. It has announced reduced net purchase volumes and the market would benefit from the ABSPP to start tapering and, while we see slow changes in this regard, I would not expect the ECB to make sharp movements any time soon," he noted.

RB