New proposals for updating the Basel II framework would impact structured finance globally, and the asset-backed commercial paper market in particular, Fitch Ratings says.

The rating agency notes that the proposals, published last month by the Bank for International Settlements, seek to update the Basel II framework in response to market events of the past 18 months, which have triggered global financial turmoil by making several changes to how banks calculate their minimum capital requirements.

“Originally Basel II was intended to promote a level playing field by providing neither an incentive nor a disincentive for a bank to securitize assets. However, under the latest proposals for re-securitisation exposures there would be a clear disincentive for banks to provide liquidity facilities to ABCP conduits,” says Peter Winning, a director in Fitch’s European structured finance team.

The proposals are currently under consultation until April 17. Fitch notes that when the final guidelines are published, it will update its special report on the impact of Basel II on the ABCP market.