BoE publishes securitisation discussion papers: BoE has published two discussion papers. The first, issued with the European Central Bank (ECB), looks at the securitisation markets and the second considers credit data:
- The securitisation discussion paper looks at the benefits of a well-functioning securitisation market. It notes there is little activity in EU securitisation markets, despite the ability of securitisation to free up bank capital and provide non-bank financial institutions with access to a broader pool of assets. The paper looks at possible reasons for the low activity. It suggests this may be partly reputational, following the attention complex structures and poorly underwritten loans received in the light of the financial crisis. It also suggests that perceived conservative regulatory treatment and lack of standardisation and performance data might contribute. It then considers possible measures to revitalise the markets, including developing high-level principles for "qualifying securitisations" and harmonising securitisation standards across the EU. It notes three steps fundamental to market reform:
- a product which is simple and transparent to investors;
- incentives to encourage banks prudently to originate and monitor the loans that they make; and
- investor access to enough historical data to understand how underlying loans will perform across a wide variety of circumstances.
- The credit data discussion paper looks at how improving the availability of credit data might benefit credit provision from both direct channels, such as bank lending, and indirect channels, including securitisation. The paper looks at the benefits and risks of making data more widely available and considers several options, including possibly involving credit reference agencies or setting up a Central Credit Register.
BoE seeks comments on the securitisation paper by 4 July and the credit data paper by 29 August. (Source: BoE Publishes Securitisation Discussion Papers)
BoE explains Resolution Directorate: BoE has explained how its Resolution Directorate works and its role in dealing with failing banks, building societies, investment firms and central counterparties. (Source: BoE Explains Resolution Directorate)