Credit Securitisation Facility
A resolution to develop industry around the world.
Category: Advancement of Industry
Area of Effect: Commercial Enterprise
Proposed by: Imperium Anglorum
Whereas there are personal savings not producing returns that could help grow economies or meet buyers' needs:
And whereas securitising debt increases liquidity in capital markets, transfers risk from risk-averse investors to willing buyers, and increases the supply of loanable funds:
And whereas a single nation's assets lack the diversity to stop highly correlated movement in default rates:
And whereas creating a credible support scheme against illiquidity crises would help to prevent negative shock transmission from capital markets to the real economy, thereby lowering the chances of extreme hazards being imposed on national populations by increasing unemployment, lowering investment, and causing bankruptcies:
Now, therefore, be it enacted by this august World Assembly, as follows :—
Member nations shall allow the sale of secured financial products, i.e. "base assets", to the Credit Securitisation Facility and other public investors. Member nations may make reasonable purchasing rules on those base assets unless they affect the Facility.
There shall be established a Credit Securitisation Facility, i.e. "the Facility", to tranche and securitise reasonably uncorrelated base assets. It shall publicly document the components from which those securities are produced. All produced securities shall fulfil the most stringent reasonable transparency rules established by member nations or the Assembly in future legislation.
The Facility may subcontract out the maintenance of its products to third parties. When it does so, those products must maintain their original uncorrelated character and posted coupons.
The Facility may guarantee its products. It may use funds from its support programme to make those guarantees credible.
The Facility shall produce public indices to provide information on current pricing practices for securities it produces and their component base assets.
The Facility shall create a liquidity support programme. It shall invest its net income in safe interest-bearing assets. If an illiquidity crisis threatens the financial system and the Facility has exhausted its loanable funds, it may borrow monies from the General Fund for this programme. The derived proceeds and monies shall fund the support programme.
For a financial institution to be eligible for liquidity support, the institution must file public disclosures detailing:
its owned properties and subsidiaries, its balance sheet, the balance sheets of its subsidiaries,
risk factors to its business, currently on-going legal proceedings,
documentation of its accounting procedures, and
other data that the Facility believes useful in determining an institution's value.
Institutions shall certify that their disclosures are truthful. Institutions must also have a history of and commitment to maintaining such disclosures before being eligible for support.
If financial institutions require liquidity support, the Facility may extend such support, for limited times only, at its discretion. It shall do so through secured loans or preferred share purchases. The Facility shall publicly report the quantity and details of all its liquidity actions. When providing liquidity support, the Facility shall secure its loans with proffered equity capital or illiquid assets, in this subsection, "collateral". The Facility shall govern:
the proportion of the principle secured so that it is not onerous on or a subsidy for that institution and
the value of that collateral at reasonable normal market rates.
The Facility shall not support what it believes to be truly insolvent institutions.
The Facility shall create easily accessible public datasets for its disclosures and release data it believes helpful and not sensitive for investors in valuing eligible institutions.