Bank of England studies how to boost debt repackaging

LONDON, March 28 Fri Mar 28, 2014 8:15am EDT

LONDON, March 28 (Reuters) - The Bank of England may act to revive the securitised debt market, a policymaker said on Friday, the latest sign that products which triggered the worst financial crisis in a generation are coming in out of the cold.

Clara Furse, a member of the British central bank's Financial Policy Committee, said small firms are finding it hard to get loans from banks focused on meeting tougher capital requirements following the 2007-09 financial crisis.

The FPC monitors risks in the broader financial system.

Expanding market-based finance, such as raising money by issuing securitised debt, would broaden available funding for companies and help the economic recovery, Furse said in her first speech since becoming an FPC member a year ago.

The committee will assess and, where necessary act to promote a better functioning market for securitisation in Britain, a sector that bundles loans into a bond, she said.

Securitised debt has shrunk after a corner of the market based on subprime U.S. home loans became untradable in 2007, sparking a global meltdown in markets and a banking crisis.

Reviving the sector is seen as core to weaning the European economy off its reliance on banks to fund the economy.

"Non-bank and market-based finance widen participation and enhance diversity in the financial system," Furse said in a speech in Liverpool and made available to the media. (Reporting by Huw Jones; Editing by Catherine Evans)

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