The Financial Times reported this weekend that the Basel Committee on Banking Supervision may ease the capital requirements on securitizations.
"We need to look at the appropriateness of various structures and pass judgment on them. This should happen next year," Stefan Ingves, the Basel Committee on Banking Supervision chairman, was quoted as saying.
The regulations as they stand currently are “widely believed by market practitioners to further curtail securitization activities, if not revised, when implemented," said Ron D'Vari, CEO and co-founder of NewOak Advisors.
"The much higher risk-based capital requirements alone will reduce profitability of the securitization and force many players to reconsider,” he said.
But softening of the risk-weighted capital should come with the tightening of how the rules are applied, explained D’Vari.
“It is our view that as regulators become more experienced with various aspects of the risks in securitization and can discern the differences in sensitivities of various asset classes and structures, the rules will evolve with them and become more in line with reasonable risk probabilities expected through a full cycle," he said.