Basel II will reduce securitisation by banks, but won’t alter bank ratings, says Fitch Ratings

The implementation of the more risk-reflective Basel II will reduce the attraction of securitisation as a means of lowering banks’ regulatory capital requirements, but is unlikely to change the ratings of originating banks, according to a special report published by international rating agency Fitch Ratings.

Fitch Ratings agreed that if Basel II succeeds in more accurately defining risks and in setting regulatory capital requirements accordingly, particular varieties of securitisation will become less attractive to banks.

In the report, Securitisation and Banks: A Reiteration of Fitch’s View of Securitisation’s Effect on Bank Ratings in the New Context of Regulatory Capital and Accounting Reform, the agency said that although the pending regulatory and accounting changes may result in a reduction