Securitised assets move

The financial regulator plans to help Australian banks cut their reliance on the "kindness of strangers" for their funding through an overhaul of the nation's securitisation markets.

The financial regulator plans to help Australian banks cut their reliance on the "kindness of strangers" for their funding through an overhaul of the nation's securitisation markets.

In a move that could also support competition in home lending, the Australian Prudential Regulation Authority on Monday flagged changes to bolster the market for lower-risk securitised assets.

Securitisation refers to the practice of selling bundles of assets, such as mortgages, to investors.

In the United States it played a key role spreading sub-prime debt before the 2008 global financial crisis. But Australia's sector has posted relatively low default rates and regulators see it as a valuable alternative to volatile short-term money markets.

APRA's executive general manager Charles Littrell said the regulator was developing a new framework that would reduce constraints to investing in securitised assets that were "obviously safe". At the same time it will introduce "substantial disincentives" to investing in riskier assets.

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