LONDON, April 11 (IFR) - Global and European
standard-setters must revisit their rules on asset backed
securities to lift deadly hurdles in the market, the European
Central Bank and the Bank of England warned today.
Calling jointly for regulators to ease and align rules for
securitised product, the two central bank authorities said the
asset class will be an increasingly crucial source of funding
for the region's starved corporate universe.
They said proposed capital rules "treat ABS in ways that
might be perceived as unduly conservative", disregarding the
relatively sound performance and low default levels of such
The draft requirements would be particularly punitive
"relative to other forms of long-term wholesale funding such as
covered bonds," the note said.
Lawmakers should focus on setting out consistent criteria
for identifying sound, straightforward ABS that can boost
investor appetite on one side, and provide a controlled tool for
banks to offload credit risk without shutting down their lending
activity, on the other.
This would mean they should scrap their "currently-proposed
'catch all' regulatory treatment for all ABSs."
The short paper, published ahead of the International
Monetary Fund summit, which takes place over the weekend, also
blames global agencies for having created "inconsistencies
in a number of different fields such as capital charges and
However, the note did point to recent efforts by EU bodies,
on the risk retention rule and due diligence requirements, as
positive steps towards boosting transparency and aligning
interests between banks that originate the securities and
(Reporting By Anna Brunetti, editing by Alex Chambers)