Newsletter Oct 2005: Capital rules may impact securitisation perversely

NEW YORK – Less sophisticated banks, often with less developed risk management techniques, will have an incentive to invest in riskier assets under the proposed Basel II capital rules for securitisation. The possibility for a perverse outcome is one of the key conclusions of new research by credit rating agency Fitch Ratings into the impact of the proposed capital rules on the securitisation industry, which is one of the most rapidly expanding segments of the global finance industry.