(1888PressRelease)
September 06, 2007 - The asset-backed securities market in Latin America needs greater regulation if performance is not to be curtailed, it has been argued.
Although around $20 billion worth of securities backed by assets including mortgages and credit card payments were traded in 2006 - up from $6 billion in 2002 - a report released by the Bank for International Settlements (BIS) suggests that countries including Brazil, Mexico and Argentina have unclear definitions on what can be used as collateral for the bonds.
This in turn is hindering demand for the securities and collateralised debt obligations, the BIS claims.
"The small average size of issues and their lack of secondary market liquidity suggest that the market for securitised assets remains in its infancy,'' the BIS said in its review.
The report goes on to suggest that currency fluctuations and political uncertainty in the region over the years has "interrupted the introduction of new laws to improve the legal structure required for the securitisation process".
When analysed in the context of the crisis in the US subprime mortgage sector, the BIS is convinced that a re-evaluation of the securitisation process is needed.
"Some fine-tuning and improvements could further promote this financing technique,'' the bank said.
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