US banks fear that any recovery in the US housing market will be delayed because of moves to remove credit ratings from US regulations, which will boost banks’ capital requirements by billions of dollars.
Bankers have until Friday to respond to a proposal by the Federal Reserve and other regulators that would increase the “risk weights” on securitised assets, driving up sharply the equity capital that banks are forced to set against them.
Securitisations are financial products that bundle loans and then sell off slices with different levels of risk. About 700 bank representatives dialled into a conference call set up by the Office of the Comptroller of the Currency this month to discuss the move. Of particular interest is the impact on “private-label” securitisations of mortgages without government guarantees, a part of the credit market thought to be crucial for the revival of the housing market.