Bank of England Financial Stability Report indicates support for securitisation

In its November Financial Stability Report, the Bank of England has expressed strong support for securitisation as a financing channel.  It has expressed the desire to see a return of a securitisation market and has identified temporary reasons and possible structural reasons for the weakness of existing issuance.  PCS strongly agrees with the identified temporary reasons – deleveraging, central bank liquidity, regulatory uncertainty and a lingering stigma against the product from some investors.  PCS also notes the tentative identification of structural impediments to a return of the market: lack of standardisation of documents and structures, difficulties in modelling and the absence of ways to overcome high fixed costs for smaller issuers.  We agree that these “may” be impediments but, in agreement with the Bank of England, do not believe the importance of these impediments is very clear.  The comments on securitisation can be found on page 46 of the report that may be found here.