Securitization bankers baulk at Basle II

The latest plans of international regulators for capital adequacy requirements threaten to cripple the securitization industry, bankers reckon. Proposals from the Basle Committee on Banking Supervision would force banks investing in asset-backed securities to hold a much larger amount of capital in reserve than for corporate bonds of the same credit rating.

"The securitization group seems to have set off on its own path, which does not align with the Basle II process at all," says a UK banker.

"The extra capital requirement, which is not justified, will harm securitization unless it is changed," says Mark Nicolaides, a securitization partner at Mayer, Brown, Rowe&Maw. "The regulators are going to impair the ability of people to do deals, and they're going to increase the costs of doing deals."

The rationale of the Basle proposals is to make sure banks put enough aside to cover investment losses. The proposals set a standard...