Global initiative acts to unfreeze credit markets

Restoring confidence in the securitisation and structured products markets requires “expanding and improving independent third party sources of valuations and improving the valuation infrastructure and contribution process”.

This was among eight key recommendations released today by the Joint Initiative to Restore Confidence in the Securitisation Markets in a bid to restart frozen global credit markets.

The recommendations of the initiative, which included representation by the Australian Securitisation Forum, are aimed at standardising industry practices in the securitisation and structured credit markets.

“They have [the] global reach and impact to restore confidence in the securitisation markets and are important steps to develop best-practices and improve market infrastructure,” said Tim Ryan, president of the Securities Industry and Financial Markets Association.

Another key recommendation was to “increase and enhance initial and ongoing pool information on RMBS [residential mortgage-backed security] into a more easily accessible and more standardised format”.

Yet another was to “establish core industry-wide market standards of due diligence disclosure and quality assurance practices for RMBSs”.

Establishing a Global Securitisation Markets Group to report publicly on the state of the market and changes in market practices was also recommended.

The initiative also identified multiple factors that have “contributed to the rapid growth in securitisation and structured credit over the last several years and left the market particularly vulnerable to any misstep”.