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22 October 2012

Bloomberg: Asset-backed securities may face tougher oversight in Basel plan

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Banks trading asset-backed securities may face tougher capital requirements and stricter oversight from global supervisors amid concerns that regulation is failing to curb excessive-risk taking.

The Basel Committee on Banking Supervision is about to embark on a “fundamental” review of how securitisation is regulated, Wayne Byres, the group’s secretary general, said.  “Ultimately it’s driven at capital treatment, but it’s also about reflecting on what have we learned from the crisis about securitization, and the way risks within securitisation work”, Byres said.

The boom in the US and European markets for securitised debt prior in the years leading up to 2008 has been identified by regulators as one of the main reasons for the collapse of Lehman Brothers Holdings Inc and the ensuing financial crisis, as lenders struggled with a plunge in the debt’s market value.

The push on securitisation adds to the Basel group’s list of priorities as it seeks to move forward on liquidity rules for lenders. The measure, which is designed to make sure banks hold enough easy-to-sell assets to weather a 30-day credit squeeze, has been the subject of intense discussion over concerns that it might restrict lending to businesses and make it harder for central banks to implement their policies.

Full article

© Bloomberg

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