COUNTING THE CAPITAL COST: STRUCTURED PRODUCTS REGULATION

摘要

After a few years on the ropes in the aftermath of the financial crisis, the structured products market is, by common consent, in pretty good health. Increased product standardisation has led to an uptick in volumes, and investors are becoming more mobile, looking beyond domestic markets for returns. Banks have also made their peace with the treatment of asset-backed securities (ABSs) in the Basel Ⅲ liquidity coverage ratio (LCR). The LCR requires banks to hold a buffer of high-quality assets that will help it survive a 30-day period of intense market stress, and after initially rejecting a role for ABS within the measure, Basel regulators now allow banks to allocate up to 15% of the buffer toward these instruments. Structured product dealers still see the ratio as flawed, but not in any irredeemable or fatal way for their market.