Global regulators launch study of securitisation market
LONDON, July 3
LONDON, July 3 (Reuters) - Global banking and market regulators will study whether they should intervene to revive securitisation, a market that bundles loans to raise funds and was tarnished in the financial crisis.
Securitised debt based on poor quality U.S. mortgages became untradable in 2007, unleashing a chain of events that led to the global markets meltdown, with taxpayers having to rescue banks that had chunks of the debt on their books.
Since then, the market has failed to recover in Europe in particular, a region which depends heavily on banks for funding the economy at a time when they are focusing more on boosting their capital buffers than granting loans.
"This review of securitisation markets is intended to understand and identify potential impediments to the development of sustainable markets," the Basel Committee on Banking Supervision and International Organisation of Securities Commissions said in a statement on Thursday.
The European Central Bank and Bank of England are already trying to kickstart top quality securitisation and encourage investors to return though banks say it's time to take regulatory action.
Bankers point to two hurdles: high capital charges set by the Basel Committee on banks that create securitised debt; and high capital charges set by an EU law on insurers who would normally buy it.
ECB officials have said that if Basel won't reduce the charges, Europe should go it alone and cut them itself.
Basel and IOSCO set a July 25 deadline for industry to complete a survey for their study, which will be aided by the International Association of Insurance Supervisors, and the International Accounting Standards Board. (Reporting by Huw Jones; Editing by Mark Heinrich)