Basel Threatens Market-Making in Securitized Debt, JPMorgan Says
- Banks may need to hold up to four times as much capital
- Final guidlines expected in December, may take effect by 2019
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New rules proposed by international banking regulators would severely reduce, and possibly eliminate, banks’ profitability in trading bonds that finance everything from home loans and apartment mortgages to auto loans and student debt, according to JPMorgan Chase & Co.
The rules, expected to be finalized in December by the Basel Committee for Banking Supervision, impact nearly all forms of securitized debt, and may force banks to “completely rethink” their market-making activity for asset-backed securities, JPMorgan analysts John Sim, Amy Sze and Meghan Kelleher wrote in a note to clients on Monday.