A third meeting on asset encumbrance was held on Friday under the auspices of the International Capital Market Association and with the support of the Swedish central bank, to help shape what the chair of the meeting described as a “second phase” of the debate about secured funding levels.

Some forty investors, issuers and regulatory experts gathered in London to discuss the issue of the level of secured funding employed by financial institutions in Europe and to examine what levels of additional disclosure might be useful to investors, according to the International Capital Market Association (ICMA).

“The broad conclusion was that extra work will be needed to assess the risks associated with asset encumbrance and potential responses,” it said, “with a particular focus on improving information for investors while balancing the practical needs of issuers and the concerns of regulators and central banks.”

Riksbank in conjunction with the Swedish Financial Supervisory Authority in October called for issuers to take the lead in releasing information relating to asset encumbrance, an approach that stands in contrast to that under consideration in Norway, where the regulator has flagged the possibility of issuance limits or capital charges.

Two meetings of the ICMA working group took place already last year, in Frankfurt, with Tim Skeet, ICMA board member and chair of the meeting, noting that the debate has shifted since then.

“We are moving from the initial proscriptive phase, where the rules were drawn up, to the second phase of a more detailed dialogue involving fine tuning those rules and identifying and debating unintended consequences,” he said.

He told The Covered Bond Report that there is greater recognition that regulatory initiatives can have unwanted side effects and that, with important technical work related to asset encumbrance having been done, it is important to take the initiative to help “widen, broaden and deepen the informed debate”.