The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.

All material subject to strictly enforced copyright laws. © 2022 Euromoney, a part of the Euromoney Institutional Investor PLC.

Is securitization that insecure?

Source: 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.

The proposals themselves are fiendishly complicated. But the complaints focus on two areas. One is that the new accord reduces the capital charge banks have to take against certain classes of loans, such as mortgages, personal loans and smaller company loans, that tend to be heavily securitized under the existing regime. This concession, it is argued, makes it less likely that banks will securitize the same volume of these assets in future as they do now.

The second beef is that the new accord actually penalizes securitization. Take as an example the case of a bank securitizing a pool of five loans with a total value of $100, against which it is obliged to reserve in aggregate capital of $10.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree