Equity toxic waste in asset-backed securitisation
Equity toxic waste in asset-backed securitisation
With the ongoing change in focus from regulatory capital to economic capital comes a need to reassess banks current practice in disposing of the equity toxic waste produced as a by-product in the asset-backed securitisation process. Financial innovation coupled with the speed of change in financial markets and the sheer complexity of some financial transactions poses real difficulties for supervisors and regulators in this context. The development of risk-based regulation will undoubtedly result in compliance with the form of the new Basle II regulatory requirements. However, risk-based regulation in itself will not ensure that banks treat equity toxic waste in a way that is wholly compliant with the substance of the new Basle regulations. In the UK life assurance sector the Financial Services Authority (FSA) has been moving in the direction of embedding the concept of "a compliant competent organization" into the industry. This paper argues for a similar approach for financial entities engaged in asset-backed securitisation.
University of Southampton
Wolfe, Simon
9a2367fc-36cc-496a-bbd2-e7346bcbb19e
2004
Wolfe, Simon
9a2367fc-36cc-496a-bbd2-e7346bcbb19e
Wolfe, Simon
(2004)
Equity toxic waste in asset-backed securitisation
(Discussion Papers in Accounting and Finance, AF04-22)
Southampton, UK.
University of Southampton
Record type:
Monograph
(Discussion Paper)
Abstract
With the ongoing change in focus from regulatory capital to economic capital comes a need to reassess banks current practice in disposing of the equity toxic waste produced as a by-product in the asset-backed securitisation process. Financial innovation coupled with the speed of change in financial markets and the sheer complexity of some financial transactions poses real difficulties for supervisors and regulators in this context. The development of risk-based regulation will undoubtedly result in compliance with the form of the new Basle II regulatory requirements. However, risk-based regulation in itself will not ensure that banks treat equity toxic waste in a way that is wholly compliant with the substance of the new Basle regulations. In the UK life assurance sector the Financial Services Authority (FSA) has been moving in the direction of embedding the concept of "a compliant competent organization" into the industry. This paper argues for a similar approach for financial entities engaged in asset-backed securitisation.
More information
Published date: 2004
Identifiers
Local EPrints ID: 36273
URI: http://eprints.soton.ac.uk/id/eprint/36273
ISSN: 1356-3548
PURE UUID: 4d5a72d8-736d-410e-8f29-e17e25debb57
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Date deposited: 23 May 2006
Last modified: 16 Mar 2024 02:44
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