Under Basel II, banks could lower capital charges by investing in rated securitization structures rather than by directly holding a comparable pool of unsecuritized assets, said Fitch Ratings in a new report exploring the quantitative impact of the Basel II capital charges on securitization structures. The focus was on particular product lines like credit card asset-backed securities (ABS), commercial mortgage-backed securities (CMBS), and residential mortgage-backed securities (RMBS).

In the report published last week, Fitch evaluates the amount of Basel II capital that banks must hold on an unsecuritized pool of assets in comparison to holding a securitized structure of these same assets. "Looking ahead, we may see banks looking for opportunities to reduce their Basel II capital requirements by investing in credit card ABS, CMBS, and RMBS markets," said Stuart Jennings, managing director in Fitch's European structured finance team.

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