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Regulators review incentives for securitisation

By on September 10, 2015

The International Organisation of Securities Commissions says there has been mixed progress in the implementation of incentive alignment recommendations for securitisation.

This, it said, followed a peer review of the incentive recommendations.

Securitisation is the process of taking an illiquid asset, or group of assets, and through financial engineering, transforming them into a security.

The final report on the peer review, published by the global body, which has Nigeria’s Securities and Exchange Commission as a member, describes the implementation progress made by 25 jurisdictions in adopting legislation, regulation and other policies in relation to incentive alignment in securitisation.

The report, according to a statement by IOSCO, responds to a request from the G20 Leaders in September 2013 for IOSCO to conduct a peer review on the implementation of incentive alignment regimes, including risk retention requirements.

IOSCO had published the ‘Incentive Alignment Recommendations’ in November 2012, as part of its final report on ‘Global Developments in Securitisation Regulations’.

The report covers the three incentive alignment recommendations in the 2012 report, which call for national authorities to evaluate incentives across the securitisation value chain, formulate and implement approaches to incentive alignment.

It also calls national authorities to set out the elements of the incentive alignment approach, including risk retention as well as seek to minimise the potentially adverse effects to cross-border securitisation transactions resulting from differences in approaches to incentive alignment and risk retention.

According to the statement, the review reports progress in implementation as of 30 April 2015 (the reporting date), but it does not assess the consistency of implementation measures against the recommendations in the 2012 IOSCO report.

“The Review found that participating jurisdictions have made significant but mixed progress in implementing the incentive alignment recommendations,” IOSCO said, adding that it reported progress only on implementation of the first and second recommendations.

It explained that a review of implementation of recommendation three was considered premature; as of the reporting date, many jurisdictions were still in the process of implementing the recommendations or had not yet begun.

 

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