Quite apart from its economic merits, the attractiveness of ABS for investors has become something of a hostage to financial regulation.  On 26 September 2012, Jonathan Faull,  director-general, Internal Market and Services at the European Commission wrote to Gabriel Bernardino of EIOPA (the European insurance regulator) suggesting that capital requirements under Solvency II for “long-term investment”, such as investment in infrastructure projects, could be reduced, including where such investment is made in the form of securitisation.  It has been reported that the ECB is promoting the idea that certain ABS be eligible for inclusion in the liquidity buffer under Basel III. Both of these changes could greatly increase the liquidity and hence the attractiveness of certain types of asset-backed security. 
Continue Reading Are regulators waking up to the need to encourage securitisation?