APRA takes tough stand on securitisation
By
Andrea Cornish
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30/08/2010 5:20:00 AM
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1
comments
The fledgling promise of increased competition from mid-tier and small lenders is under threat from Australia's bank regulator, which found some banks have been "inappropriately" understating their risk to securitisation.
The Australian Prudential Regulation Authority has taken a tough stand on securitisation, after a review on the market revealed lenders could be exposed to risky loans.
APRA rejected lenders’ claims that the high interest charged on risky loans and mortgage insurance should be enough to protect against losses.
The regulator also warned banks that it would not "take a favourable" approach to lenders that made bilateral agreements to buy the riskier tranche of securitisations from one another.
The review could mean a slowdown in securitisation as lenders work to increase the level of capital needed to hold against RMBS transactions.
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Sell debt while there's time: UBS
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Country Broker on
30 Aug 2010 02:01 PM
This article makes we wonder what types of loans the banks are trying to securitise, and why APRA are expressing concerns , especially the banks are playing higher rate and LMI as the enhancements.These loans are not toxic.
The RMBS market is strong on the uptake, and the underwriters would be really cautious, and considering we have just come out of the worst GFC ever , some quality of the book must be evident to the underwriters.
Still APRA needs to be vigiliant and keep the banks well in line, because like many brokers , we have some doubts about them and their policies and attitude.