Source: www.breakingviews.com is Europe’s leading financial commentary service.
Securitization has been one of the big growth areas of the capital markets. So it is no surprise that investment banks and a ratings agency are concerned about the proposed new Basle II rules on bank capital. These, they fear, could act as a major drag on market development.
The new Basle accord threatens their earnings from securitization, a technique whereby loans are converted into tradable securities. It does this by both reducing the incentive for banks to securitize their loans, and making the process itself more capital-intensive.
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