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“The focus of reviving these markets should be to build a sustainable non-bank investor base, and to avoid a system where you are just recycling the credit among banks", Greg Medcraft, chairman of the International Organisation of Securities Commissions said. Medcraft said regulators will set up an international working group to “look at possible impediments” to getting more “real money” into the securitisations market, with the intention that bank, insurance and securities regulators are all involved.
In tandem with toughening regulations, authorities are increasing looking for ways to encourage the development of the market as a robust alternative to bank loans for companies seeking credit. The need is driven in part by banks scaling back lending to focus on balance sheet repair and meeting tougher capital and liquidity rules. “We have a great opportunity now to reshape the securitisation sector as a form of market-based financing", said Medcraft. “It can be a very efficient tool.”
Securitisation “has become the mother of all plagues", Olivier Guersent, chief of staff for Michel Barnier, the EU’s financial services chief, said. “But securitisation if you think about it is nothing else than a means to transform short-term savings into long-term investment", he said. IOSCO plans a peer review to compare rules put in place by different national regulators that require banks and other originators of securitised debt to retain some of the financial risk, Medcraft said.