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Securitisation changes ‘would benefit smaller banks’

APRA’s proposed changes to Australia’s securitisation framework are a credit positive for banks, according to Moody’s Investors Service.

The credit ratings agency said the proposed changes will improve banks’ access to securitisation funding by broadening the investor base, as well as enable the securitisation of new asset classes.

John Paul Truijens, assistant vice president at Moody’s, said some of the proposals by APRA – in particular, the re-introduction of date-based calls and allowing early amortisation provisions in funding-only securitisations – have the potential to enhance the appeal of Australian securitisations to a broader base of investors.

As such, Moody’s vice president Daniel Yu said the proposals could improve access to securitisation funding for Australian banks, while also lowering issuance costs.

“The changes would benefit the smaller banks in particular, given their narrower set of funding options and weaker access to unsecured wholesale funding,” he said.

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However, despite the potential benefits arising from APRA’s proposals, Moody’s warned that an over-reliance on securitisation would be credit negative for Australian banks.

“Access to the securitisation markets could become restricted during times of market volatility,” he said.

“In addition, a significant amount of secured funding, such as securitisation and covered bonds, would reduce the amount of bank assets available to support the claims of depositors and other unsecured creditors.”

[Related: APRA to simplify mortgage securitisation rules]

Securitisation changes ‘would benefit smaller banks’

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>The credit ratings agency said the proposed changes will improve banks’ access to securitisation funding by broadening the investor base, as well as enable the securitisation of new asset classes.

John Paul Truijens, assistant vice president at Moody’s, said some of the proposals by APRA – in particular, the re-introduction of date-based calls and allowing early amortisation provisions in funding-only securitisations – have the potential to enhance the appeal of Australian securitisations to a broader base of investors.

As such, Moody’s vice president Daniel Yu said the proposals could improve access to securitisation funding for Australian banks, while also lowering issuance costs.

“The changes would benefit the smaller banks in particular, given their narrower set of funding options and weaker access to unsecured wholesale funding,” he said.

However, despite the potential benefits arising from APRA’s proposals, Moody’s warned that an over-reliance on securitisation would be credit negative for Australian banks.

“Access to the securitisation markets could become restricted during times of market volatility,” he said.

“In addition, a significant amount of secured funding, such as securitisation and covered bonds, would reduce the amount of bank assets available to support the claims of depositors and other unsecured creditors.”

[Related: APRA to simplify mortgage securitisation rules]

Securitisation changes ‘would benefit smaller banks’
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