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RBA announces changes to securities

AAP   The Australian    October 22, 2012

THE Reserve Bank of Australia (RBA) is introducing industry-wide reporting standards for mortgage-backed securities to boost investor confidence in the market.

The new standards, which for the first time will allow investors to compare the performance of mortgage-backed securities on a like-for-like basis, comes in the aftermath of the global financial crisis, which crushed the volume of new issuance.

If, after a transition period beginning early next year, issuers have not conformed with the new reporting standard, their securities would become ineligible for the central bank's repurchase agreements (repos) program.

The RBA uses repos to manage the amount of cash in the banking system and sometimes to support markets, including the market for residential mortgage-backed securities (RMBS).

RBA assistant governor financial markets, Guy Debelle, said the data, to be reported quarterly, would benefit the broader market by providing more transparency to Australian RMBS.

"The Reserve Bank will also require that issuers make these reporting templates available to the public, free of charge," Dr Debelle told the Australian Securitisation Forum in Sydney on Monday.

"Issuers will have to inform the Reserve Bank of where their data are being stored and being made available to the public.

"It will also be a requirement that issuers ensure that these data are accurate."

Dr Debelle said that while some information on RMBS was generally available, reporting standards had varied significantly across issues, since there was currently no regulatory standard for RMBS reporting in Australia.

"The available data also tend to be dispersed in a number of different locations, making it difficult to gather.

"Hence, in consultation with the Australian Securitisation Forum, we have sought to achieve some uniformity and greater depth in the information reported," Dr Debelle said.

The details of the information to be required at least each quarter on both existing and new RMBS will be set out in reporting templates, to be made available on the RBA website.

Dr Debelle said the new standards would help the RBA to more precisely value the securities held on its balance sheet in terms of both price and risk.

They would also decrease the RBA's reliance on credit rating agencies in assessing the securities.

The standards were similar to those introduced by the European Central Bank and Bank of England, while in the United States the Securities and Exchange Commission was considering what information needs to be provided by issuers as a result of new legislation.

Dr Debelle told the conference that RMBS issuance in 2012 had recovered to the point where new issues were replacing maturing issues so that the stock outstanding was no longer declining.

The issuance in the year to date has totalled $10 billion. By way of comparison, in the second quarter of 2007, at its peak, issuance amounted to $25 billion.

Last modified onTuesday, 28 May 2013 09:23

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