By Huw Jones
LONDON, March 17 Global regulators will
intensify their efforts to revive a securitisation market
tarnished by the financial crisis and now seen by policymakers
as a key source of funds for the economy, the head of an
umbrella regulatory group told Reuters.
Securitisation bundles loans into interest-bearing bonds to
raise money that banks can use to fund themselves and lend to
Banks, particularly in Europe, are traditionally the main
supplier of loans but have become cautious as they focus on
rebuilding their capital buffers.
The International Organization of Securities Commissions
(IOSCO), which groups global market regulators, and its banking
counterpart, the Basel Committee, will consider possible
"IOSCO and the Basel Committee are close to agreeing on a
working group to look at how the securitisation markets are
working, and to see whether new thinking is needed." IOSCO
Secretary General David Wright told Reuters on the sidelines of
a Chatham House financial conference.
The sector was tarnished when securitised products based on
sub-prime U.S. home loans became untradeable in 2007, sowing the
seeds of a global markets meltdown and banking failures.
The European Union's executive European Commission is also
keen to bring securitisation out of the cold and will publish
its plans next week on ways to boost long-term financing.
The Association for Financial Markets in Europe (AFME), a
banking lobby, gave a mixed welcome to Wright's announcement.
"Unfortunately, even after strong messages of support from
many high-level policymakers in recent months, on the day-to-day
level we continue to encounter new regulations for
securitisation which are unjustified and will restrict the
market's recovery," said Richard Hopkin, the AFME's head of
"This sends negative signals to investors and further tilts
the playing field against securitisation."
Efforts to revive securitisation have also been caught up in
separate regulatory attempts to crack down on so-called shadow
banking, or lending outside mainstream methods such as regulated
The EU wants a greater amount of financing for the economy
to come from market-based sources such as securitisation.
About 30 percent of financing comes from such sources, the
rest from banks. That is roughly the opposite situation to the
U.S. model that some European policymakers want to match to
reduce concentration of risk at banks and diversify funding.