The role of securitisation in the future Australian financial system is to serve as a compliment to the funding of the economy that is provided through the traditional banking system. Securitisation provides a means to diversifying the funding of a financial institution. It is attractive to smaller ADIs that have limited access to term funding markets. It also provides a potential source of competition in the housing and consumer finance markets, given the highly concentrated nature of the Australian banking system. Securitisation can also provide a means to transfer risk, particularly residential property risk, outside the banking system.
In the future the operation of seamless cross-border securitisation markets will be increasingly important. Australia’s major banks are expected to face constraints under Basel III in the amount and type of credit they can supply. The capacity of capital markets to provide an alternative source of financing for consumers and businesses must include both domestic and global investors.
This paper was presented in July 2014 at the 19th Melbourne Money and Finance Conference (MMFC), which explored the theme Current Issues in Australian Financial Markets.
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