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...
