Basel II focus switches to securitisation after SME loan solution agreed

Experts working on the Basel II bank capital rules are focusing on the technically difficult issue of asset securitisation after agreeing a solution this month to the politically sensitive problem of how lending to small and medium-sized enterprises (SMEs) should be treated under the pact, international regulators said.

The SME solution is along lines previously foreshadowed by regulators. It centres on allowing banks to set aside on average 10% less protective capital against loans to smaller businesses than to large corporations. Regulators believe the proposals will calm fears in some countries that Basel II would stifle lending to small businesses. Many loans to SMEs will be treated like retail loans to consumers as opposed to corporate loans.

With asset securitisation, technical experts are concentrating