Another Whack in the PLS Slapdown

On Tuesday, the Basel Committee released a proposed rewrite of the global capital framework for asset securitization. Reflecting the disdain with which international regulators increasingly hold most secondary markets, the global standards would sharply hike the regulatory capital required for banks holding PLS pieces and covered investors. Combined with the stringent global capital rules for trading-book ABS, the emerging securitization framework poses a serious obstacle to the return of a private RMBS market unless new transaction structures, guarantees and other risk mitigants are deployed.

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