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The Chancellor of the Exchequer, Alistair Darling, announced on Wednesday that the Working Group will draw on the experience and expertise of lenders, investors and the Tripartite Authorities (the Treasury, the Bank of England and the Financial Services Authority).

Mortgage-backed securities market 

The establishment of the working group follows the publication of the Treasury's housing finance review alongside Budget 2008.

The Working Group will consider options for improving the mortgage-backed securities market, including measures aimed at broadening the investor base for mortgage-backed securities and improving the robustness of the market.

Its first task will be a broad-based assessment of the current state of the mortgage finance market.

The Chancellor said that the recent and ongoing disruption in global financial markets had raised complex issues about the functioning of the mortgage-backed securities markets.

He added that the recommendations of the working group would be an important contribution to stabilising the cost and supply of UK mortgages.

Market-developed and market-led 

Sir James Crosby, who will chair the working group, said, “These difficulties stem from problems in the markets, so to be effective any proposals to deal with them must be market-developed and market-led. Our job in this group will be to facilitate a discussion between lenders, investors and the authorities with a view to identifying market-led solutions that will work.”

The group will present an interim report to the Chancellor later this summer and a final report at the time of the 2008 pre-budget report.

The housing finance review reported at Budget 2008. It identified the recent and ongoing disruption in financial markets and the lack of longer-term fixed rate mortgages in the UK as key challenges for the UK mortgage market.

The terms of reference for the Working Group are to consider initiatives to improve the mortgage-backed securities market as a stable source of mortgage finance over the medium and longer term.

These may include measures aimed at broadening the investor base for mortgage-backed securities and improving the robustness of the market.

Potential adverse impact on existing securities 

The working group has also been asked to consider specifically the appropriateness of documentation and reporting requirements, the suitability of existing issuance structures; and full and regular disclosure of the quality of the underlying assets.

It take into account any potential adverse impact on existing mortgage backed securities and assess all proposals in terms of their benefits, costs and risks and ensure that they are consistent with the authorities' broader objectives of macroeconomic and financial stability and prudent financial management

Sir James Crosby is currently a director of ITV plc and Compass Group plc, and a trustee of Cancer Research (UK).

In 30 years in the financial sector, he has worked in the investment, insurance and banking businesses, most recently as chief executive of HBOS. He also serves on the Financial Services Authority board as deputy chairman.

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Related links

• HM Treasury