PNC Financial Services Group has begun winding down Market Street Funding, an asset-backed commercial paper conduit with $5.9 billion oustanding at the end of June, according to a filing with the Securities and Exchange Commission.
A spokesoman for the company said the catalyst for the move is the proposed liquidity coverage requirement under Basel III. Observers have argued that this regulation would jack up the costs of sponsoring ABCP programs.
Under the rule, banks would be required to hold high quality liquid assets that cover potential cash outflows in the event of a crisis. Any committed liquidity or credit support facilities provided by the bank that could be drawn within thirty days to pay for maturing ABCP would be considered cash outflow items.
PNC's wind-down is part of the $209 billion-asset PNC’s overall strategy to diversify and expand its borrowing base.
The end of its CP progam does not mean PNC is retreating on the securitizaton front. "The business of originating structuring and executing client securitization transactions remains an active and growing business for PNC," the spokesman said, adding that this sector will be financed from a diversity of sources.
PNC, based in Pittsburgh, has administered Market Street Funding since 1995. PNC said that it will continue serving clients’ securitization needs through its asset-backed finance business.
The bank said the wind-down, which it expects to have no meaningful impact on its financial condition, should be completed by the end of the fourth quarter.
(With additional reporting by Felipe Ossa.)