Gold standard for MBS plan rapped

The government’s plan to introduce a gold standard for mortgage-backed securities is under fire from industry pundits who question its scope.

Chancellor Alistair Darling is expected to unveil the standard in Wednesday’s Budget in a bid to reopen the wholesale mortgage funding market.

If approved, MBS tranches that meet the government’s standards of creditworthiness will be awarded with the gold standard.

But Matthew Wyles, group executive director of non-retail business at Nationwide, says: “This is incredibly ill-thought through. Unless the government offers a guarantee it’ll only be treading on rating agencies’ toes.

“Rating agencies have a globally recognised sophisticated system of rating securities. The UK government can’t propose the standard with a simplistic kitemark.”

Angus Armstrong, a Treasury official, is heading the team assigned to create the standard.

A spokeswoman for the Treasury declined to comment on details of the gold standard but confirmed it will be unveiled on Wednesday.