The Basel Committee on Banking Supervision and the International Organization of Securities Commissions (IOSCO) on Thursday released final criteria that aim to encourage the financial industry to develop simpler, more transparent securitization structures.

The initiative addresses one of the issues that emerged during the financial crisis, which is that securitization structures were too complex, and that some investors had a hard time understanding their exposures.

These criteria are intended to help guide the financial industry in developing better structures, the Basel Committee stresses, they are not intended to be a substitute for investors’ due diligence. Although the criteria are not a prescription for regulatory action, the Basel Committee is exploring how these criteria could be incorporated into its rules, it notes.

“Since the onset of the financial crisis, securitizations have continued to be perceived as too complex, and insufficient information has been available to investors to enable them to perform their risk assessments. These criteria aim to help address some of these issues,” says Greg Medcraft, chairman of the IOSCO board and of the Australian Securities and Investments Commission (ASIC) in a statement.

The criteria that address simplicity refer to the homogeneity of a structure’s underlying assets, and the complexity of the structure itself. Criteria on transparency focus on providing investors with sufficient information on the underlying assets, the structure of the transaction, and the parties involved in the transaction. In addition, the criteria dealing with comparability aim to facilitate more straightforward comparison between similar products within a given asset class.

The criteria were published for comment last December, and they have undergone a few revisions in response to industry feedback, the Basel Committee notes. “Overall, respondents welcomed the initiative, and broadly agreed that the proposed criteria might further assist investors in their investment decision-making process,” it says.