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Basel III Punishes Dutch Over Risk That Isn’t: Mortgages

Investors in 262 billion euros ($347 billion) of Dutch residential mortgage-backed securities risk being penalized by new bank liquidity rules, even as the securities prove among the safest home-loan bonds globally.

The notes won’t be categorized as liquid assets under regulations approved last week by the Basel Committee on Banking Supervision because the underlying mortgages have an average loan-to-value ratio of 95 percent, a quirk of the Dutch housing finance system, where borrowers take on more debt because they can use tax deductions in place since the 19th century. The rules only allow banks to apply securities where the ratio is less than 80 percent, according to committee documents.