ACC and AIMA respond to FSB review of securitisation framework

02 September 2024

Our response highlighted the value of the securitisation market to the real economy and to mobilise capital to invest in SME growth and key strategic areas, while highlighting the policy failures.

The ACC and AIMA submitted a response to the Financial Stability Board (FSB) consultation report evaluating the effects of the G20 financial regulatory reforms on securitisation.

Our response highlighted the value of the securitisation market to the real economy and to mobilise capital to invest in SME growth and key strategic areas.  We also argued that some securitisation asset classes like Collateralised Loan Obligations (CLOs) have a positive effect on the risk profile of the securitised assets, credit risk and financial stability.

The response also argues that:

• The post Great Financial Crisis (GFC) reforms in the European Union and United Kingdom around capital requirements and the prudential framework have not been successful and do not follow a risk-based approach.
• The FSB has not properly considered the evolution of the Significant Risk Transfer (SRT) market.
• The regulatory response aimed at strengthening requirements for investors to conduct adequate due diligence has been a failure.
• The FSB does not fully integrate the good performance of the CLO market into its analysis and fails to account for all the structural features of the new generation of post-GFC CLO 2.0.
• Other market best practices and forms of ‘skin-in-the-game' such as fee structures can provide for greater alignment of interest than risk retention.
• The European Simple, Transparent and Standardised (“STS”) framework, has failed to achieve its objective of creating an attractive vanilla and simple securitisation asset class for less sophisticated investors like prudentially regulated firms

The FSB is expected to publish the final report on the evaluation exercise in late 2024

 

AIMA

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