(Corrects capital buffer to liquidity buffer, in headline and
third para. LCR deadline is set under CRD IV in second para.
Quality securitisation initiative attributed to EU legislators
in seventh para)
* EC pushes back deadline to determine liquidity buffer
* New deadline coincides with EBA report on quality assets
* High quality ABS may have case for inclusion in LCR
By Anna Brunetti
LONDON, June 19 (IFR) - The European Commission is
postponing a decision on new bank liquidity regulations, sources
with knowledge of the matter said, a delay that could give
Europe's securitisation sector a badly needed shot in the arm.
As regulators struggle with the task of defining the
so-called Liquidity Coverage Ratio (LCR), the deadline set under
the capital requirements directive (CRD IV) has been pushed back
three months to September.
Insiders say that could allow more time to get more
securitised products approved as liquidity buffer when the new
liquidity rules are finally announced.
Both the Bank of England and the European Central Bank have
called for the rehabilitation of the structured finance market,
which fell into disfavour in the wake of the global meltdown.
Securitisation might be a useful way to boost the eurozone
economy as it could increase the supply of loans available to
At the moment, under the proposed Basel III rules, only
certain residential mortgage-backed securities (RMBS) qualify -
those in the lower tier of the LCR's second level - and even
these are subject to a 25% haircut.
But members of the securitisation industry say those
parameters are too narrow, especially with the notion of
high-quality securitisation (HQS) being introduced by European
The sector wants better treatment through lower capital
charges - meaning buyers have to hold less capital against their
ABS investments - and wider inclusion in the liquidity buffer.
And there are signs that these pleas for change are being
"If safe and transparent products are identified, then the
Commission is keen on considering this in the prudential
treatment of securitisation," said Chantal Hughes, spokeswoman
for Commissioner Michel Barnier.
Officials sources inside national finance ministries and
elsewhere told IFR that there was "definitely" progress on
widening out the terms of a draft circulated in May, under which
the range of ABS accepted as a second-tier liquidity buffer was
broadened but is still subject to a 25% haircut.
The extension to the deadline also coincides with that of
the parallel stream of work that the European Banking Authority
is carrying out to define high quality assets, after being
tasked by the Commission earlier this year. This extra time
would allow the Commission to assess the EBA's findings, and
even incorporate HQS principles into the LCR.
(Reporting By Anna Brunetti, editing by Anil Mayre, Alex
Chambers and Marc Carnegie)