Thursday, February 19, 2009

Banks and rating agencies to comply with ESF principles

By Paul J Davies (Financial Times):

A number of banks and the leading rating agencies have agreed to a set of principles designed to govern reporting standards and improve transparency in the moribund securitisation industry.

The European Securitisation Forum, the leading industry body, will say today that 12 banks running 17 different mortgage bond issuing trusts are ready to comply with the standards, and rating agencies have agreed a common reporting template.

Disclosure of performance data related to mortgages and other underlying debt and securities in complex structured bonds has long been inconsistent both in terms of what was disclosed and when issuers disclosed it, causing difficulty and frustration to many investors even in boom times.

However, regulators and international bodies have pushed for big changes since the credit crisis struck, while both investors and issuers see standardisation and transparency as a key requisite for getting the market off the ground again.

"The securitisation industry understands the need for change and consistency of reporting," said Mark Hickey, chairman of the ESF, adding that a number of other banks should sign up by the end of the year.

The principles from the ESF, which is part of the global Securities Industry and Financial Markets Association, form part of a global effort to restart the securitisation markets and follow on from a set of guidelines from the American Securitisation Forum, which that group hopes to implement by the end of the year.

However, it is a moot point whether such moves can help the markets to recover when some of the biggest traditional investors - banks and bank-run investment funds - are either gone forever or very unlikely to have the necessary funds.

Further, some of those issuers that have signed up to the principles, such as Bradford & Bingley, look unlikely to ever issue securitisations again. However, the ESF said that the principles would help not only transparency in the markets, but also efficiency.

"Our overall goal is to help restore confidence in European securitisation by demonstrating the industry is actively improving disclosure standards," said Marco Angheben, director of the ESF.

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