ABS Set for Revival under U.S. Treasury’s Liquidity Buffer Plan
According to Risk.net, the U.S. Department of Treasury's report that recommended some securitizations count as Level 2B assets could spur the market for high-grade structured credit. U.S. banks started disclosing their LCR and HQLA figures as of the end of the second quarter this year. An analysis by Risk.net shows that 0.3 percent of total HQLA held by the eight largest banks currently consists of Level 2B instruments. The article quoted SFIG Executive Director Richard Johns, stating, "A bank could make their ratios work by having a healthy agency and treasury book, but the profitability and net interest margin of that organization is going to be reduced as a consequence of not having higher yielding, safe liquidity investment opportunities. By introducing ABS as Level 2B HQLA you now give the opportunity for them to re-bucket and potentially pick up a better return on their liquidity portfolio."

For SFIG's overview of the Treasury report, please see our Fact Sheet and Position Matrix.

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