And, by removing derivatives and certain structural features embedded in RMBS, it will improve the Bank’s ability to manage the risk associated with this collateral. Moreover, this initiative will also allow smaller counterparties, who do not have access to securitisation platforms, or for whom the cost of securitisation is prohibitively high, to access liquidity insurance in times of need.9 The Bank started processing applications for the pre-positioning of loans in the DWF in January 2011. At the same time as announcing that it would accept portfolios of loans as collateral, the Bank formalised the next steps in its ABS transparency initiative. Following on from its consultation in March 2010, the Bank announced that it would be phasing out the eligibility of residential MBS and covered bonds that did not conform to certain transparency criteria. During a year-long implementation period, running to November 2011, those securities that do not confirm to the new standards will remain eligible for use in the Bank’s operations. But over that period, counterparties should be working to ensure that they meet the new transparency requirements. Subsequently, in the year from November 2011 to November 2012, there will be a 12 month transition, during which the Bank will begin to apply increasingly large haircuts to those securities that do not conform to its requirements. By the end of November 2012, assets that do not comply will become ineligible. The transparency initiative will help the Bank risk-manage collateral more accurately and effectively.

Even under a model that assigns all the relevant functions to the central bank, coordination and communication between it and the government will still be essential because it is the fiscal authority that is responsible for the use of public resources. In a globalized world, it is, moreover, necessary to develop mechanisms for coordination and communication with the authorities of other relevant jurisdictions. In many emerging economies, this is a key issue because of the significant presence of international banks in these markets. In addition,  BIS Review 142/2010  5  stronger coordination and communication between authorities is vital for progress towards comprehensive or consolidated supervision of financial groups and for avoiding some of the problems detected in the recent crisis. One recommendation on which there is fairly broad agreement is to periodically review the perimeter of regulation and supervision. The traditional view that this should include only institutions taking deposits from the public has been superseded by events. The consensus view that has emerged from the recent crisis is that all institutions of systemic importance must be regulated and supervised. This also includes the obligation to provide information and disclose positions in order to ensure that markets function properly. The practical implications of this recommendation may vary from country to country, depending on the characteristics of their financial systems. There is also broad consensus that minimum capital requirements, applied on permanent bases, must be raised and strengthened as stated in the recent agreement reached by the Basel Committee.