The Joint Forum urged banks to provide more transparency to investors in the securitization industry while also decreasing the complexity of the products offered.
These recommendations were contained in a report issued today called Asset Securitization Incentives, which is based on an extensive literature review and interviews in Europe, the U.S. and Australia with originators, issuers, service providers and investors.
The report examined the incentives to securitize and the distortions created by the misalignments and conflicts of interest present in the securitization market both before the financial crisis as well as after. The goal is to offer insight into why the market has yet to truly recover and give recommendations for the future.
The organization outlined three recommendations for the sector with the goal of promoting a “sustainable and responsible securitization framework.” The Forum stated that authorities should actively work toward addressing misaligned incentives, improve investor’s access to reliable information through transparency, and decrease product complexity for better standardization.
"Re-establishing securitization on a sound basis is a priority for the FSB and part of the G20's push to strengthen the international financial regulatory system,” Chairman of the Joint Forum Tony D'Aloisio said.
The Joint Forum stated that while the most important factor for a market recovery, investor appetite, is currently hindered by a variety of issues, they encourage policy makers, regulators, and supervisors to continue working together to create “internationally and cross-sectorally consistent supervisory framework.”
The Joint Forum was established in 1996 as an international group uniting financial regulators from the banking, insurance and securities industries. It operates under the Basel Committee on Banking Supervision, the International Organization of Securities Commissions, and the International Association of Insurance Supervisors.
For the full Joint Forum report, please click here.