Reforms are needed to restore the asset-backed securities (ABS) market, which suffered a major setback during the financial crisis that began in 2007, according to a study released Tuesday by the C.D. Howe Institute.

In the report, authors David Allan and Philippe Bergevin offer suggestions, from a Canadian perspective, for the restoration of a healthy ABS market.

While the role of ABS in the broader market collapse has been well documented, North American policymakers have readily acknowledged that this market must play a major role in the global economic recovery, and policymakers recently have moved from the urgent restarting of the ABS market to its reform.

An analysis of current reform proposals guides suggestions for a policy approach that reflects Canadian market realities.

Specifically, the report suggests it would be prudent in the Canadian context to impose new disclosure requirements for all public market medium-term note issuance, not just for those wishing to access the market through a shelf offering.

Enhanced transparency and better accountability regimes are welcome steps but, pushed to the extreme, may constrain the return of full liquidity to the ABS market, the report says.

For the study, go to ttp://www.cdhowe.org/pdf/Commentary_315.pdf.

IE