Volkswagen Financial Services AG, which provides financing for cars, is calling on policy makers in Brussels to allow securities supported by the loans to be included in banks’ calculations of liquidity.
“We’re asking for automobile asset-backed securities to be made essentially into their own asset class,” Volkswagen Financial board member Michael Reinhart, who is responsible for risk management, said in an interview in Frankfurt today.
The European Commission is considering which assets should be included in a liquidity coverage ratio, which requires banks to hold a certain amount of assets that can be sold quickly in a liquidity squeeze. Brussels is basing the rules on a plan developed by the Basel Committee on Banking Supervision, which doesn’t allow banks to include securitizations other than residential mortgage-backed securities in the calculations.
About one-third of VW Financial Services’ financing comes from selling automobile asset-backed securities to investors including banks. The company sold about 9 billion euros ($12.4 billion) of the debt last year.
If the securities don’t count fully toward a bank’s liquidity requirements, it will make them less attractive, since they prefer to hold assets that will also help them meet liquidity laws, Reinhart said.
Additionally, the insurance regulation framework Solvency II will probably hurt demand in the coming years since insurers will have to set aside more capital for the securities than for covered bonds, he said.