Sebi seeks more transparency in securitisation deals

The Securities and Exchange Board of India (Sebi) is of the view that disclosure requirements for securitisation transactions should be refined to enhance transparency and confidence in the market.

“I feel that the disclosure requirements (in securitised transactions) should be done in a manner that there is a balance between the quality and quantity of disclosure. Many a time, an increase in the quantity has eroded the quality of disclosures,” said Prashant Saran, a wholetime member of the regulator, told a seminar here.

The securitisation market in India is still at a nascent stage and comprises mainly deals in asset-backed securities (ABS) and credit default swaps (CDS).

“They (disclosures) should be made in such a manner that the real issues are communicated. Regulators should pay attention to this aspect,” Saran said. The International Organization of Securities Commissions (IOSCO), the international body of capital market regulators, had brought out a draft paper in May emphasising more transparency in securitisation and the recommendations were expected to be implemented by all member nations, including India, he said.

Saran said India has been ahead of the curve in putting proper regulations on securitisation, including regulating credit rating agencies, differentiating structured ratings, giving better treatment to low loan-to-value ratio and eliminating balance sheet manipulations for a better securitisation environment.