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The draft securitisation rules were one of the main points of the agenda at a meeting of the Basel committee last week in Hong Kong. The Basel group has said that it is seeking to make rules “more prudent and risk-sensitive” by setting stricter curbs on how banks should measure possible losses, and by limiting reliance on external credit ratings.
In tandem with the push for tougher regulation, authorities are also increasingly looking to securitisation as a means to boost financing of companies, at a time when banks’ lending activity is limited by the need to meet stricter capital and liquidity rules.
Other potential impediments to the market include plans by European Union regulators for implementing a Basel bank liquidity rule. Proposals by the European Banking Authority for applying the measure, known as a liquidity coverage ratio, or LCR, are "worrying", Richard Hopkin, head of securitisation at the Association for Financial Markets in Europe, said. “If the EBA doesn’t allow the inclusion of at least some high-quality securitised debt in the LCR, it will seriously hinder the prospects of recovery of the market. We don’t think they have gone about it the right way. We hope that there’s still room for them to change their minds on that.”