Law‐Based Commodification of Private Debt

Abstract

This article looks back in history to understand how private debt developed into the kind of tradable asset, or commodity, that it is today. The article theorises that development, distinguishing in it three discrete but overlapping modes of commodification, namely propertification, impersonalisation and risk abstraction. The three modes shed light on changes in debt as a legal institution and in the economic and social functions of debt. Finally, the article shows that commodification of private debt is not just a phenomenon of the past, but something to be taken into account in future law‐making, where the three modes of commodification may help to recognise particular opportunities and risks. This is illustrated by two actions included in the Commission's Capital Markets Union project, one regarding cross‐border assignments of claims, the other the European securitisation market.

Debt Expansion as “Relief and Rescue” at the Time of the Covid-19 Pandemic: Insights from the Legal Theory of Finance

“…334 The US, UK, and EU treat debt as part and parcel of financial welfare provisions, 335 in light of the retreat of the state from public welfare. Private debt can only play this role if the legal framing of its transactional relations facilitates the commoditization of debt 336 for market confidence. In other words, political and social acceptance of the role of private debt is not divorced from the legality of debt as an autopoietic regime.…”

EU Securitisation Regulation: legal ordering in symbiosis with transnational bodies

“…43 What is needed in addition is regulation of the other links in the transaction chain so as to diminish the demand for securitised debt of dubious lending standards and the profitability of originate-to-distribute models. 44 However, the primary contribution of the Securitisation Regulation to creating a sustainable securitisation market is the STS criteria (and recalibrated prudential treatment). As the BCBS and IOSBO note, '[a]n important lesson from the 2007-09 financial crisis was that the securitisation structure itself can represent a source of risk'.…”