There are various policy initiatives under way to address the aforementioned shortcomings: At the EU, in accordance with the Ecofin roadmap, CEBS (in coordination with the industry) has been mandated to review public disclosure of types and amounts of securitisation exposures, significant individual transactions and Special Purpose Vehicles exposures by 7 banks and to consider complementary guidelines. At the international level, the Basel Committee on Banking Supervision (BCBS), following the Financial Stability Forum (FSF) recommendations, will issue further guidance to strengthen 8 disclosure requirements under Pillar 3 of the Basel II framework. However, the onus of identifying areas of improvement and providing useful disclosures that allow investors to assess the risk/return profile of financial institutions rests primarily with the industry. In this respect, I would like to make special reference to the European Securitisation Forum that since the early stages of the turmoil has acknowledged the importance of enhancing transparency. As you know, its work addresses the pertinent issues of (i) developing guidelines of best practices concerning securitisation disclosures; (ii) providing periodic aggregate data concerning the securitisation market and (iii) enhancing information to investors on the composition and performance of underlying assets at issuance and on an on-going basis. Availability of information is critical to maintain incentives along the securitisation chain and to enable market participants to make informed decisions. The quality of the documentation underlying issuances, such as pre-sale reports by rating agencies and prospectuses, should be improved.

First, being capital costly, the ability to sustain a given level of credit supply with a lower volume of capital enables the banking sector to reduce the costs of financing for borrowers and favours financial development, which is ultimately associated with economic growth. Moreover, securitisation may be seen as representing a step towards more complete credit markets, thereby contributing to enhancing the efficiency of the economic system. 3  See ECB (2007), Structural Issues Report on “Corporate finance in the euro area”, May. 4  Funding liquidity refers to the ability of a bank to: (1) convert its assets into cash by disposing of them or borrowing against their value in order to meet expected and unexpected obligations, or (2) to issue liabilities in order to raise funds. 5  According to some tentative empirical evidence, increasing securitisation may diminish the impact of monetary policy impulses on banks’ loans supply via the so-called “bank lending channel”, although the effect of securitisation seems to depend on the economic cycle and bank risk (see Altunbas, Y., Gambacorta, L. and D. Marqués Ibáñez (2007), “Securitisation and the bank lending channel”, ECB Working Paper 838. 2  BIS Review 68/2008  In addition, the securitisation of loans in principle could reduce a secular source of vulnerability of the economies, by taking risk concentrations associated with loan portfolios away from the balance sheets of the banking sector and spreading them more broadly across other sectors.